Examination of Witnesses (Questions 106-119)
17 NOVEMBER 2003
MR DIRK
HAZELL AND
MR PETER
JONES
Q106 Chairman: Can I welcome here
two regular attendants, I might say the usual suspects. Dirk Hazell,
from ESA, and Peter Jones, wearing a Biffa hat. We are grateful
to you for coming yet again. You have been sitting in and hearing
the discussion. What is the role of local authorities in all of
this?
Mr Hazell: We do not know yet.
Transposition is less than a year off and, notwithstanding the
efforts of this Select Committee over the years, our efforts over
the years, even the guidance of the Better Regulation Taskforce,
we do not know actually who is going to be doing what. I think
strands of that came through fairly clearly in the evidence you
were given last. The last witnesses stated quite correctly that
local authorities are not going to have a specific duty, as they
do not, under the Directive and I think DTI has indicated they
are not minded to impose that. We are in the slightly curious
situation at the moment where, in terms of collection, we are
complying with the requirements of the Directive, but where we
are not in treatment. Although this is only hearsay, I think that
the British Government may have added to the difficulty, because
our understanding was that it was in the Council of Ministers
that the British Government, and obviously we stand to be corrected
by the Minister when you call him, it was a British Minister who
did not want local authorities to have a particular duty to collect
the waste separately. When you look at what the environmental
objectives of this Directive were meant to be and nobody at ESA
wants cost for the sake of it as the only point in having any
additional cost is to achieve an environmental benefit presumably
the main environmental benefit of collecting electronic goods
is not to recycle the concrete base of washing machines but actually
to stop the heavy metals, for example, and the printed circuits
from going into landfill. If you want to do that, you might want
a very clear role for local authorities. In a long-winded way,
we do not know yet what local authorities are going to be doing.
Mr Jones: The central issue behind
your question reflects this whole malaise of ownership and the
association of authority and responsibility. As I put in our submission,
Mr Chairman, you have got the chaos, in terms of ownership, between
DTI, Defra, Treasury, ODPM, and indeed the Environment Agency
on the periphery of that process. What we have here is a process
where Government seems to have accepted the notion of "producer
responsibility" but it is not prepared to drive those messages
through the price chain. Nobody is saying to the general public
out there that "If you want all this, it is going to cost."
We think, in the industry, "about £5 billion a year,"
in total, not just for WEEE and Vehicles. At the moment, about
100 million tonnes of waste is handled by our industry for about
£50 a tonne, and our calculations are that those same 100
million tonnes can be managed much more effectively for an incremental
£50 a tonne, moving it to £100. That is an average across
the entire British waste stream. The consequence is then that
the Government is on the horns of a dilemma, because, if it is
not going to drive responsibility crisply through the manufacturers,
or the retailers (the supply chain prices), to recover those costs,
then it will be pumping in more and more money through Defra.
Sometimes DTI takes ownership of this process, as it has done
with WEEE. Sometimes, in the case of Packaging, Defra does it.
What DTI has succeeded in doing basically is deferring the liability
for those costs to be transferred through supply chain prices,
and it has left Defra with the responsibility now to go to the
Treasury and say, "Can we have about £20 million a year
to pick up all the fridges? Can we have" (on our estimates)
"about £30 million a year to deal with abandoned cars?"
(although that is getting less, because the price of scrap has
gone up.) "Can we have £170 to offer money to local
authorities to put in kerbside recycling?" which Ms Ruddock
has emphasised quite rightly is a key issue—and well done
on the Bill. If you want to give that responsibility to local
authorities then the Government is going to have to find that
money from the Treasury, if it wants to deliver these objectives,
otherwise it has got to grasp the nettle and drive it through
these supply chains. In fact, what it has done with tyres, WEEE,
with hazardous household waste, and all the other products, is
starting off this huge consultation process and then just leaving
industry to fight it through different power blocks, (whether
it is the retailers or the manufacturers) who say, "It's
not my problem, it's theirs." For the general public, when
all this comes out in the wash, as you have touched upon, you
are going to end up with different systems for different products
in different parts of the country, and people will laugh at us,
we will be a laughing stock. Not our industry but parliamentarians
and Government, because, in some cases, there are tradeable permits,
in others you would not dream of taking an old abandoned car back
to a car dealership but you will have to do that for electric
hair-dryers. People will laugh. There is no consistency, no general
system at all.
Q107 Chairman: There is an awful
lot there. Let us try just to unpick some of that and focus perhaps
on three areas. First of all, a lack of ownership, a lack of leadership
in Government, and we will come to that in a second. Secondly,
there is a question of who pays, and maybe there are short-term
costs and longer-term costs. Short-term costs maybe are Exchequer
costs, through Defra, to local authorities. In the longer term,
surely it must be the case that the producer takes more responsibility,
with a knock-on effect to the consumer? The third issue, and you
guys are the professionals, I am really struggling to see what
this system is going to look like in four or five years' time,
three years' time, maybe you could describe that to us? Let us
start with the easy one, an area that we are familiar with. What
is going on in Government and why cannot we resolve this? Maybe
we could have the reply in one minute, without deviation and repetition?
Mr Jones: I would suggest Chair,
the same line of response that I gave to the House of Lords Committee.
We need a crisp responsibility within the Environment Agency,
who have got immense technical skills, both scientific and numeric,
in terms of data capture and data collection, and Defra, (of which
ostensibly they are a part) effectively to be the guardians at
the gate. They have to come out with standards that define preferably
who is going to pay, and what sort of basic technologies and operating
processes and transparency on data collection are required. We
think the system would work, as far as Biffa is concerned, far
more effectively if DTI took ownership of about 15 million tonnes
of materials, that legitimately could be brought under the "Producer
Responsibility" framework, from packaging to cars. Over the
last 200 years, we have an industrial society that delivers things
into society in conventional categories: fridges, clothing, shoes,
office furniture, and so on. Those people design products and
put materials in them, in some cases, without an awareness of
the long-term pollution potential, and giving them back that liability
could change the way those products are designed, sold, leased
and how long they live. If producers of mobile "phones had
that responsibility then you would not be getting kids persuaded
that they should have a new mobile "phone every fortnight.
In terms of ownership then that applies to that 15 million tonnes.
Clearly, ODPM has to be liable for household waste. You could
not make farmers liable for food waste, that is crazy, so the
ODPM has a liability for around 20 million tonnes of material
that is just dross in the domestic supply chain. Then you have
a sort of "producer responsibility" in the construction
sector, but you do not make quarry manufacturers responsible for
all buildings maybe. Effectively we have not even had any of that
debate about these overarching structures, we have gone straight
into the detail and replicated a lot of different systems on an
ad hoc basis, without any overall consistency.
Mr Hazell: Clearly there is a
problem with attitude within the British Government. Following
the changes in the Maastricht and Amsterdam Treaties, the approach
to the Government—
Chairman: We are going to break there,
gentlemen, for a division.
The Committee suspended from 5.06 pm to
5.15 pm for a division in the House.
Q108 Chairman: We are going to put
Mrs Organ on the Sub-Committee, and that is agreed by acclaim,
so this is a coronation. We will continue. I think we were talking
a little bit about different responsibilities, divided responsibilities,
and you were going to follow up some of the points that Peter
Jones had just made?
Mr Hazell: I was agreeing with
Peter but then, just very briefly, going on to say that, in terms
of negotiating the Directive, we are a million miles from the
second recommendation of the Better Regulation Taskforce, as far
as our sector is concerned. The difficulty is, I think, from the
Government's point of view, that the Maastricht and Amsterdam
Treaties actually do change the whole structure of making new
European policies. The character of our engagement with the European
Commission, including the European Commissioner now, on the forthcoming
thematic strategies on recycling and resource efficiency, so it
is future policy, is of a different order of magnitude from the
engagement we have had with DTI, in terms of the negotiation of
this Directive. We were informed when drafts changed during negotiation
of the Directive, but there was never any engagement with us on
the practical impact that any of that would have. Certainly, when
it comes to implementing the Directives that have been agreed
already, when you are looking at this sector, quite simply there
has not been the investment in human skill, within the process
of Government, in human resources. I think we would agree quite
strongly with the evidence which has been given already.
Q109 Chairman: Let us go back to
the second issue we were talking about, costs, and I think, Peter,
you were saying in very strong terms that this is a cost that
is falling on the taxpayer in the short term, is that right?
Mr Jones: In the short term, the
way that the Government has set this ball rolling, by deferring
"producer responsibility", means that Government cannot
escape the Directives to which it has signed up, and therefore,
as a result, it has to face subsidy support, principally to local
authorities, of course. If you look at that across the entire
waste stream, our submission always has been that is an open-ended
mechanism for support and it could reach easily £1 billion
a year fairly quickly, in terms of the additional monies that
local authorities will need to manage this process.
Q110 Chairman: For all the Directives?
Mr Jones: Yes. At the moment,
on our estimates, there is about £500 million to £600
million going in, under various guises, including organisations
like WRAP, and so forth, which essentially are market-support
mechanisms. In the case of your original question of who pays,
ultimately, this is the consumer, but nobody really is coming
clean and saying, "Do you want to pay that through the price
of products in the shops, where the responsibility is up the supply
chain, or do you want to pay it through income tax, VAT, and so
forth, up to 2005/2007, when these Directives all come together
through local authority support systems?" The fridges funding,
for which I think Michael Meacher obtained £80 million over
three years, will end at the end of this year. Does that mean
that local authorities, which currently are spending £20
million a year to retrieve fridges from the system, are going
to have to take that out of their other budgets? Of course, the
ODPM's office do not bother really. They say, "Well, that's
Defra, they have got to fight that battle with the Treasury."
It is not an ideal mechanism.
Mr Hazell: This particular Directive
is clear about who has to pay in the end. It is a "producer
pays" Directive and there are also specific obligations on
the retail sector. I agree with what Peter said, that in the end
what you have got to get to with electronic goods is very clear,
but in less than a year from transposition we have not got a clue
what is going to happen, I think as the retailers' evidence made
very clear to you. Which is a potential risk, because at the moment
we have got a collection system which works, more or less, but
the funding of that will have to change because it will have to
go to the producer.
Chairman: Let us stop there. The third
issue about what the game is going to look like in two or three
years' time we will come back to in a minute, towards the end,
and I will ask Austin if he would like to chip in there.
Q111 Mr Mitchell: There is an element
of self interest in what you are saying, surely? What you are
saying, essentially, is that when the producer pays the producer
will pay you to dispose of it. In the interim, Government is doling
out money to local authorities to patch up the situation, not
to Biffa?
Mr Jones: Ultimately, the local
authorities then come to us or to our competitors. As an industry,
we have always maintained that the cost per unit, or however you
look at it, for the retrieval of these products, Mr Mitchell,
is handled far better through these large contracts that are managed
by two or three companies on the supply side. At the moment, you
have got 600 district councils running around. All they want to
do is just get the fridges collected, so they are going out, with
no cohesive framework for negotiating large-scale infrastructures-
they are paying a lot more per unit and environmentally it is
not very sensible. You have got a lot of vehicles that are running
a lot of kilometres, taking material, and there is just no tracking
system in place for these things. If manufacturers had that responsibility,
they would need to be overseen, I think, by the Office of Fair
Trading, so that there was no chicanery, in terms of hidden price
increases, but basically our suggestion is that you would have
very strong purchasing groups that procured the logistics and
the retrieval systems. Technically, those companies would own
that product and they would let other contracts for their disposal
and management, and, ultimately, that is what we need to be moving
to. The current manufacturer reservation about buying into that
process is because many of them are not making enough money to
bear that cost. I think the much more legitimate discussion should
be around how those incremental costs could be supported. Rather
than give subsidies to the public bodies, the local authorities,
it might be better to look at, say, reducing the National Insurance
contributions from the electrical manufacturing sector, or the
car manufacturing sector, as an offset. "The deal is, you
take over liability for collection and management next year, we'll
audit the cost, as Government, through the Agency, and then you
can have 100% recovery of that cost in year one, through NRC relief
in your sector." Then step that down over ten years.
Q112 Mr Mitchell: The thing itself
sounds sensible, except that most of the manufacturers are now
overseas?
Mr Jones: True, but the reality
again is that, in Europe, the European governments have been much
more precise in their thinking, they have defined that framework,
and in most cases it is the same companies that you are talking
to, the Phillips, the Electroluxes, the Fords, the General Motors,
and so on. What we have in this country is a system of endless
discussion, and nobody in Government takes ownership and says,
"This is what you're going to do."
Q113 Mr Mitchell: What sorts of costs
are going to be faced by your organisations in investing to meet
the requirements of the Directive?
Mr Jones: At the moment, if you
look at the product costs they vary enormously. We can let you
have separate evidence on the calculations that we have done.
If you look at ex-works costs for a car manufacturer then, anybody
in the industry will tell you, you can depollute a car for about
£50, compared with the average car selling price of several
thousand pounds. In the case of a fluorescent lamp, it costs 50
pence to make it and it is going to cost 50 pence to depollute
it, so you are talking about enormous variations in the cost of
neutralising products based on their selling price and their toxicity.
Q114 Mr Mitchell: They used not to
have those chemical applications. Is investment now being held
up because of a lack of clarity about how it is going to operate?
Mr Jones: Most definitely, and
this is pervasive across the whole waste industry. I do not like
going back to the example of fridges but it was a classic, because,
as I put in our submission, any waste company wants three simple
requirements. First of all, we need to know who is going to pay,
who is the customer. Secondly, we need to know to what standards
we have got to operate. Thirdly, we need the comfort that those
standards are going to be applied. Unless we have got all those
three beans in a row we are not going to put in money. What you
see is lots of rogues and charlatans, (as you have seen in fridges)
and so on, and to this day Defra will say that there is no fridge
problem now. There is. We are still emitting, on our calculations,
50% of the ozone-depleting substances that those regulations were
supposed to cure, and nobody has been able to prove to me that
we are having that material burned.
Mr Mitchell: I sympathise with you. We
have got the same competition from rogues and charlatans in politics.
We do not say anything about it though.
Q115 Joan Ruddock: Can we go back
to the issue of local authorities. In the ESA's written submission,
obviously, you suggest that further development of the sites would
be easier, quicker and more cost-effective, I think you said,
than developing completely new deposit infrastructure. I wonder
if you could develop that a bit and say why it would be easier,
quicker and more cost-effective?
Mr Hazell: Broadly, we are complying
with the collection requirements of the Directive already.
Q116 Chairman: This is the four kilograms?
Mr Hazell: Yes. It is about a
quarter of this particular waste stream, so broadly we are compliant
already with the collection requirements, and some people do take
waste to civic amenity sites, so it is existing infrastructure.
Given the relatively short timetables, I think the process of
thought is that, given that there is not very much time and there
is a shortage of infrastructure, the thing to do is to use what
we have got and make the best of what we have got, rather than
start completely from scratch. Contrary to what Mr Mitchell was
saying, in a way it is sort of the opposite of self interest,
it is trying to save money.
Q117 Joan Ruddock: We have heard
already today that a lot of amenity sites just may not be up to
the job, they may not have the capacity, they may not have the
space, the skills, and so on and so forth. What needs to be done
to ensure that, across the country at large, they can be set up
in such a way as to deal with the Directive?
Mr Hazell: In a way, that is easy
to answer. The ones that are capable of this should be capable
of getting the planning consent and the licensing conditions to
allow them to take this waste stream and to manage this waste
stream, which includes a hazardous component, so the licensing
and planning, if it were sufficiently responsive, could deal with
a measure of this. We are not saying that civic amenity sites
are the sole solution. If you have a single household and it is,
say, a widow without a car, it is completely unrealistic to expect
her to put a washing machine in the back of her car, and the Directive
is quite clear that, as a country, we have got to provide alternatives.
I think what our evidence is suggesting is there is something
at the moment that works and probably there is more capacity there.
One option for the Government is to make the most of that capacity.
Mr Jones: There are several thousand
of these sites out there. Through Biffaward, we have funded a
study that is being done at the moment by the Bristol grouping,
an independent "green" NGO, looking at best practice
on CA sites and analysing this in detail, and that report will
be out in January or February. In essence, our vision is that
within the next ten years there will not be tips or waste centres
or civic amenity sites, they will be material depollution centres,
and we are not having any discussion whatsoever out of these individual
boxes. There needs to be a planning approach to these large, centralised
facilities, which our company is looking at installing and is
developing, and you will have tyres, you will have fridges, you
will have contaminated soils etc. They will be like landfills
above the ground, but this stuff will be being depolluted by a
variety of mechanical, technical, thermal and chemical routes.
At the moment we are not even anywhere near that debate. We are
looking at each of these Directives serially and then coming up
with a method to neutralise cars, and then applying a different
philosophy for glass and a different one for plastic, and so on.
These will be large factories, they will look like Tesco's or
Sainsbury's warehouses to the general public, and they will be
huge sources of potential employment. On our calculations, we
need 20,000 to 30,000 extra people in our industry by 2020 to
run these. Huge employment opportunities, and the kids that are
going to be running these things are taking their GCSEs currently,
because these are going to be needed to be running by 2015.
Q118 Joan Ruddock: I do not disagree
with that future vision, but if you are in the inner-city, as
I am, in my constituency in Lewisham, there is no way that the
current civic amenity sites could become those factories. Planning
constraints, licensing, none of it would work. What are the changes
that you will need, because it will have to be a licensing regime,
it will have to be in planning, will it not, if that vision is
the one that is going to be realised?
Mr Hazell: There is that, but
one of the reasons we supported your Bill—one of the reasons—was
that if the Government went beyond the minimum requirement of
this Bill and required segregated collection of electronic goods
it could make life a lot easier for a lot of people. Also it would
achieve an environmental outcome, because the Directive is quite
clear, once there is separate collection that stuff has got to
be treated properly and recycled. In addition there is nothing
that we know of that the Government is doing to comply with the
minimisation requirement in the Directive. The first priority
is prevention, but if you get to Article 5, 5.1, on minimisation,
there is nothing we know the Government is doing with this. Actually,
a broader version of your Bill would have dealt with that particular
problem.
Q119 Joan Ruddock: If I may say,
with your indulgence, Chair, I am very grateful for the support
I received. It is now an Act of Parliament and I am delighted,
but as you say there is much, much more to be done. The model
that you envisage, first of all, clearly the future model is some
way off, but in the meantime is it that it is going to have to
be a mixture of collection systems, that no one system is going
to do this? Would it be reasonable to suggest that the bigger
companies ought to take in as much as they can by return, particularly
where people are buying new goods, and that we should have a combination
of local authority activity and big company activity?
Mr Jones: Very much so, and indeed
I would include the NGOs in this process as well, because in fact
they represent the best available route to quelling this huge
public disquiet that is set off around these different technical
options. Fundamentally, somebody is going to have to tell the
public that we are moving from this low-tech, hidden approach,
using large landfills, to what are going to be fairly high-tech
processes. We and many of our competitors have got the balance-sheet
strength to invest in these processes, provided our three requirements
are there. The funding is not a problem but the location and the
explanation will be. I would add just very quickly as well that
it does need the manufacturers to be taken off the back foot,
where they are resisting this process, and for the Treasury to
be involved in this process. Currently they are looking at proposals
to redistribute the incremental amount of the landfill tax, and
these sorts of things should be on the agenda, to encourage a
quid pro quo for taking that liability, but we do not want
to drive those jobs out of the UK either, those limited manufacturing
jobs.
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