Examination of Witnesses (Questions 260-279)
15 DECEMBER 2003
MR NEIL
MARSHALL, MR
STUART COTTAM
AND MR
SHANE MELLOR
Q260 Mr Mitchell: In what way will it
damage it?
Mr Cottam: The pillar of recycling
is economic sustainability. We are in a situation whereby the
permitting is driving us to make speculative investment because
we do not know what the return on that investment is going to
be. We are in a position where we have to take on trust in order
to make that investment, that Own Marque will not allow the vehicle
manufacturers inappropriate leverage, the Environment Agency will
regulate the industry going forward to ensure we have a level
playing field and people will not be able to cut corners, and
we are sitting in a situation where eight years on from waste
management licensing there are still between 500 and 1,500 operators
out there operating outside the law, and we are being asked to
accept on faith that the DVLA will introduce and manage an effective
continuous licensing system. From what we know about their plans
for a continuous licensing system so far, there are no plans to
tighten up on change of ownership, so the last owner will still
be able to pick out a name from the phone book, fill in his V5
and say, "That is who he said he was", and then abandon
his car two weeks later with impunity.
Q261 Mr Mitchell: That is not what you
would expect to happen, more dumping.
Mr Cottam: I think certainly we
will see more dumping. At the moment scrap metal prices are reasonably
buoyant, at the moment our—
Q262 Mr Mitchell: They are buoyant now?
Mr Cottam: Yes, they are. They
have come back this year.
Q263 Mr Drew: Why is that? Sorry to interrupt.
Mr Cottam: There is a good, worldwide
demand. I am not the world's foremost expert in this, I am not
a commercial guy, I am not a steel trader, but there is a good,
worldwide demand for steel at the moment, driven by China I believe.
So scrap prices have been—they are on their way back down
now—during the course of this year at fairly record highs.
So our industry, even at the first tier, have been paying for
end of life vehicles, and yet we will still have a significant
abandonment problem, going forward, under Own Marque.
Mr Marshall: The Committee should
be aware that prices are set by the global market; it has nothing
to do with UK operators. Secondly, on the question of abandonment,
what we are seeing is a situation unmasked. Because there is an
incentive for chaps with lorries to drive around and pick these
things up and then deliver them to recycling yards, it means the
apparent level of abandonment is much reduced. When we can no
longer do that because of this point about economic sustainability,
you will see the apparent level of abandonment rocket but it will
not change. We think over the next three to five years we will
see abandonment growing in practice so it will not just appear
to double, which we think the numbers will show, it will probably
appear to quadruple.
Q264 Mr Mitchell: Because they are not
being collected?
Mr Marshall: Yes, absolutely.
Mr Mellor: Although the markets
are buoyant at the moment once you add the cost of depollution
then you get a negative figure. This is the problem we are having.
Q265 Mr Mitchell: And the small scrapyard
with a guard dog which does not like intruders will not be able
to deal with the pollution aspects?
Mr Marshall: I sat through a conference
where the head of policing for the Agency confirmed that all of
his new resources will be applied to making sure the people who
have applied for licences comply with them. So there is no opportunity,
or likelihood, we will see any attack on the unlicensed sites.
It is certainly a non-level playing field. I would add also another
reason why we will see an increase in abandonment is because we
will see a reduction in the number of sites. If you have to drive
30 miles instead of 5 miles or 2 miles to deliver your broken
car, it will not happen. For car read battery or tyres or whatever,
because those sites also perform other obligations in the recycling
chain.
Q266 Mr Drew: Can I pick up one thing
you say in your evidence, which is that you think that the Waste
Electrical and Electronic Equipment Directive is much better drafted
and constructed than the End of Life Vehicle Directive, why do
you think that is so?
Mr Marshall: It certainly states
unambiguously that producers are responsible and that their responsibility
includes financial responsibility. What is clearly missing from
the ELV Directive is any extension of the argument for producer
responsibility. At the moment if, as we expect, we see Own Marque
appearing in the final consultation exercise, it will effectively
remove any financial obligation for vehicle manufacturers. We
will see that transferred entirely to my sector. Back to this
point about economic sustainability, it is a classic third pillar
of recycling. We have to do what is a common good, we have to
do it appropriately but we have to be able to afford to do it,
and we are going to enter an era where we will see our entire
sector moving backwards at a time when I think governments in
Europe and around the world are expecting the recycling movement
to move sizeably forward.
Mr Mellor: It has to be remembered
that our sector does actually handle 100% of end of life vehicles;
in the current situation as it is now we are handling 100% of
those ELVs.
Mr Marshall: I recall SMMT in
the first evidence saying they handle 80%, they handle 0%. We
have always handled 100% of vehicles. We do it not because Government
gives us money, but because we can afford to do it and obviously
get a return, and over the years the processes have become more
complex, the technology has advanced enormously, but at the end
of the day if the economics do not work, and they are our economics,
then my men will pack up and go.
Q267 Mr Drew: Can I be clear, are we
talking about a UK problem or is this a pan-European problem?
Is it worse in this country? Can you give me good practice elsewhere
in the EU where they seem to be better geared up, notwithstanding
the Directive?
Mr Cottam: It think it is probably
significant to note that Member States which have car manufacturers
have got very different solutions from Member States which do
not have car manufacturers. The ones which do not tend to have
gone for some central fund or tradable permit system rather than
giving manufacturers direct responsibility. So it comes, to me,
down to the strength of the vehicle manufacturers' lobby.
Q268 Mr Drew: I am glad to hear you say
we still have manufacturing in this country, some of us would
argue that is a bit of a sore point. This is the core of this,
is there almost a differentiation within the EU about how this
Directive is likely to play?
Mr Marshall: I would echo precisely
what Stuart has said. The market place is where there is a significant
manufacturing base. We have nothing against the vehicle manufacturers,
they should be our partners, but because of the conflict this
system has engendered we are up against each other, which is wrong.
I would remind you, lady and gentlemen, there have been three
major reports commissioned by the Government—one by Ernst
& Young, one by TRL and a third one by the Institute of European
Environmental Policy—and all have said that to do this properly
and to create the right kind of incentivisation to increase the
rate of recyclability you need some form of central fund. All
along we have said to Government we need incentivisation to increase
rates of recyclability for products which currently have no market.
I would cite plastic bumpers, what are we going to do with them?
We have had fridge mountains, we have had butter mountains, it
will be the bumper mountain next. There has to be some mechanism
there to encourage it. Each of those independent reports have
said there needs to be a central fund. Whether that is contained
within the price of a vehicle, which will be a very, very nominal
percentage indeed, or within the Vehicle Excise Duty, whatever,
these are relatively small amounts of money. If you are looking
at partnership between Government and industry, then a central
fund permits that common purpose to just lay enough bread on the
water to improve recyclability, which is what I think Government
want and what our nation wants.
Mr Mellor: It would also help
us to justify business plans over a five year period. At the moment
we can only see two years ahead, last owner pays, and that does
not give me a lot of confidence when you see the level of abandonment
over the last few years.
Q269 Mr Drew: I do not want to paraphrase
in an unfair way but it does sound as though you are almost asking
for a much sterner steer from Government, a much clearer regulatory
regime, and that obviously has to be aimed at the initiators of
the material. That is a fair statement, is it?
Mr Marshall: If you are introducing
producer responsibility legislation, you have to define that,
and this is ill-defined within this Directive or the application
of this Direction within the UK legal framework. I think that
is tautologically obvious. If you look at subsequent legislation,
we have a battery directive coming through, we have WEEE and others
emerging, they all define quite precisely the relative roles of
the players in the market place and who is financially responsible
for what and what levels of the system they should pay for. I
say again, we are not asking for hand-outs, but what we are facing
is the destruction of a major part of my market place and we are
not responsible for putting these vehicles on to the market. I
think there are some loose ends there.
Mr Cottam: Talking about economic
sustainability, what we are asking for, as Neil says, is not a
hand-out, we are asking for a mechanism for funding should funding
be needed, without giving the vehicle manufacturers a dominant
position in our sector.
Q270 Joan Ruddock: I want to take you
on to the WEEE Directive. Mr Marshall has said this afternoon
it has a much more coherent approach, but in the written evidence
from your Association I think you said that there still were some
problems, not least the present absence of clear guidance. I want
to ask you what guidance do you still require and from whom—from
Defra, from the Environment Agency—and what impact is that
lack of guidance to date had on investment? We have heard obviously
in relation to ELV but now in terms of WEEE please.
Mr Marshall: We have some road
to go down yet on WEEE, it is the end of next year and I think
the experience has been better though not perfect. We still do
not fully understand what the treatment facilities should be.
I think we are very worried about whether process will be defined
by Government, we think that should not be part of the Government's
role, it is the end result we want, and again we have to have
something which is economically sustainable. Certainly we have
had a better experience of the way in which officials have interfaced
with each other. I have to say I feel very sorry for Defra and
for the Agency because they have been under-resourced. It is as
clear as night follows day that they will have the same problem.
Their tasks are too large, they do not have bodies, but there
appears to be a lack of willingness at the senior policy level
to come together. Where DTI is involved, we have had very good
relationships with the appropriate officials, but of course on
ELV we have the same arm of government representing the two players
in the market place, and that has been confused. As I said before,
there is a systemic bias towards the vehicle manufacturers, and
you can see that by the level of access for lobbying which has
been given to one party and not to the other. I think this is
wrong, this should be about opportunity, about partnership and
about clarity. We do have a clearer position within WEEE and I
think we will get there. If you look at the way the Better Regulation
Taskforce looked at the problems of ELV and WEEE, they said very
clearly there have been some major, major errors with the approach
taken by Government for ELV, we need to get it right for WEEE.
I think those lessons are beginning to be learnt but it is too
late for ELV.
Q271 Joan Ruddock: Indeed, but on WEEE,
can we be clear that if there is guidance you need what is the
nature of that guidance, and is it from Defra and the Environment
Agency?
Mr Marshall: I think it should
come from Defra, they are after all the policy-setters, and the
Agency are the implementers. I would not be the first to suggest
there may be some difficulties of communication between those
two bodies, for whatever reason, I simply observe from the outside.
It does need to come from Defra. As I said before, I think we
have a slightly better outturn in prospect because of the way
in which industry as a whole has been involved, particularly through
ISA, which I would commend to you as being a very good model for
engendering co-operation between Government and a complex set
of industrial players.
Q272 Joan Ruddock: Do you have any ideas
about when you might be getting some final guidance on WEEE?
Mr Marshall: We have a consultation
out at the moment and that implies some months away. The pace
at which developments have gone is faster certainly than ELV,
and as I said before the record is slightly better, but we could
still see a prolonged approach. We may yet miss the target date.
I simply cross my fingers. I hope we do not get another problem
area. We have enough problems with ELV without having the same
thing rolling one year later on WEEE.
Mr Cottam: I spoke to my company's
expert on WEEE, I am not my company's expert, and he tells me
the issues are that we need enforceable and enforced standards,
the recovery targets and levels must be monitored, and that the
Government must not prescribe the recycling techniques; the Government
must decide what outcome they want, what level of environmental
protection they want and then leave the industry to find the solutions.
Q273 Joan Ruddock: You want to determine
your own processes?
Mr Cottam: Yes.
Q274 Joan Ruddock: The guidance is for
other things but the process is your own. Has the lack of that
guidance and the lack of that certainty held up investment in
relation to WEEE?
Mr Cottam: I think it must have.
My company has invested in a specialist WEEE processing plant.
As far as I know we are the only ones who have made that investment
in the UK so far. It is a speculative investment because we do
not know what the legislation is going to say.
Q275 Joan Ruddock: What might be the
possible number of companies which could have made special investment?
Mr Cottam: I have no idea, I am
not an expert in this field.
Mr Marshall: I would say probably
half of the recycling sector are currently handling these kind
of products, and that we are therefore looking at somewhere around
2,500 companies. It is not a very good outturn that only one company
has made one investment so far. Part of it is simply the sequence.
We have all these bits of legislation coming through, it all comes
through in a rather peculiar way, it is rushed then it stops,
it is rushed and then it stops, there is no clear strategy for
how all these bits of regulation fit together. We are hoping to
have a conversation with Sir John Harman in January, asking him
whether he understands how all these bits of regulation fit together.
Q276 Joan Ruddock: You would know if
only one company out of 2,500 had actually made this investment?
Mr Marshall: Yes.
Q277 Joan Ruddock: Your Association would
expect to know that?
Mr Marshall: Yes, absolutely.
Mr Mellor: How bizarre is it when
in my company WEEE and ELV account for 45% of my business and
yet we cannot make an investment decision on them.
Q278 Joan Ruddock: Right. Let us turn
to some other things you said. You said that physical collection
storage, sorting and treatment of WEEE are also areas where there
are problems because you do not know exactly what is going to
happen. Do you envisage a role for yourselves in terms of any
bring-back scheme for WEEE?
Mr Marshall: I would imagine that
we will be engaged through sub-contracting because in many areas
of retailing there will be a reluctance to combine the end with
the beginning. I do not suppose that we will be setting policy
for those areas. It will be driven by the large retailers or the
producers.
Q279 Joan Ruddock: We talked with a number
of witnesses about the role of the civic amenity sites and the
need for them to be expanded and somewhat changed if they are
to take on these new responsibilities, which then raised lots
of questions about planning consents and licensing and so on.
Again, what are the consequences for your members of those sorts
of expansions to take account of the new demands?
Mr Marshall: We obviously face
some interesting competitive issues, particularly if there is
some public subsidy for the local authority. On past experience,
we will obviously watch it with a little concern but not a major
concern at the moment. It is too early to see whether or not we
will see a huge shift in market shares between those elements.
It is a classic response. If we have a level playing field, the
same cost burden and the same regulatory requirement, that is
a fair game. If we all have to do that, that is something we would
all support.
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