UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 103-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE

(ENVIRONMENTAL DIRECTIVES SUB-COMMITTEE)

THE WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT (WEEE) DIRECTIVE AND END OF LIVE VEHICLES (ELV) DIRECTIVE

Monday 15 December 2003

MR NEIL MARSHALL, MR STUART COTTAM and MR SHANE MELLOR

MR ELLIOT MORLEY, MP, MR STEPHEN TIMMS, MP, MR JONATHAN STARTUP and MS SUE ELLIS

Evidence heard in Public Questions 256 - 358

USE OF THE TRANSCRIPT

1.	This is an uncorrected and unpublished transcript of evidence taken in public and reported to the House
2.	The transcript is not yet an approved formal record of these proceedings. Any public use of, or reference to the contents should make clear that neither Members nor witnesses have had the opportunity to correct the record. If in doubt as to the propriety of using the transcript, please contact the Clerk to the Committee.
3.	Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.
4.	Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

Environmental Directives Sub-Committee

on Monday 15 December 2003

Members present

Mr David Drew

Mr Austin Mitchell

Joan Ruddock

In the absence of the Chairman, Mr Mitchell was called to the Chair

________________

Memorandum submitted by BRITISH METALS RECYCLING ASSOCIATION

Examination of Witnesses

Witnesses: MR NEIL MARSHALL, Director General, MR STUART COTTAM, General Manager, Recycling Solutions, Sims Metal UK and MR SHANE MELLOR, Managing Director, Mellor Metals Limited, British Metals Recycling Association, examined.

Mr Mitchell: Welcome, gentlemen. We have Mr Mellor of Mellor Metals, a nice name. We have Mr Marshall, the Director General of the Recycling Association and Mr Cottam, of Sims Metal UK. You wrote to us, and I was grateful that you did, suggesting there has been a lack of clarity about producer responsibility, which I think is right. I wonder if you would like to develop that argument and tell us whose responsibility you think it is to clarify the rather vague wording of the Directive in respect of producer responsibility. Is it the Government's or is it Europe's?

Mr Marshall: I think it has to be our Government because they have authority delegated to them to do just that. It seems to me if we are at the end of the road with the expected transposition in April, we are in a very strange position because we have regulations in force but we do not know fully what those regulations pertain to. We certainly do not at this moment, my member companies, have full information for basing investment decisions to fulfil the requirements of those regulations. We have no idea whether people who put investments down will be able to take part in the new system, what sort of volumes they might have, what sort of costs; we still have elements of the regulations not yet clarified. So we are in something of a muddle, the whole thing seems to me to be rather back-to-front. We have a consultation from DTI which was due out tomorrow, was cancelled at 10 o'clock today. The last point at which people can apply for licences is the end of January, the consultation will now come out in the middle of January, presumably with a six or twelve week consultation period. It is all very interesting but my market place is confused. There will be casualties, no matter what we come up with.

Mr Mitchell: There will also be a reluctance to invest?

Mr Marshall: I think people are caught. They are required to apply for licences and you therefore to commit themselves to fulfil the requirements of those licences by the end of January, yet we do not even know what final form the structure will be.

Mr Mitchell: At what point did your alarm bells begin to ring as an organisation and say, "Something is going wrong here"? Were you consulted in the early stages?

Mr Marshall: My involvement has been since the beginning of March when I joined the organisation. I have to say in 30 years of dealing with legislation I have never seen such a muddled position, confused partly because of the plethora of agencies involved but also because the structure seemed to be very strange. We have had consultations where we have been looking for consensus and there are only two parties involved in this - the sector and the vehicle manufacturers - and when you have an impasse, you have no agreement, you would expect them to move on, yet we seem to keep coming back with the same approach, which suggests a systemic bias towards the vehicle manufacturing industry. I would like to say that I support very much our manufacturing sector, and in particular the vehicle manufacturing sector, but the system has pushed us against the other party in the market place and I regret that. If you look at the WEEE Directive, for example, it starts with a much more coherent approach, where everyone is pulling together, there is a greater role for industry, and I think that coherence will produce a far better set of regulations.

Mr Mitchell: How do you expect the producer responsibility aspects of this Directive are going to work? There is an "Own Marque" approach, what effect is that going to have?

Mr Marshall: I do not want to hog the microphone but clearly it enables the people who are responsible for creating the product, the vehicle manufacturers, to evade their responsibilities through their prominent position in the market place. It seems to me therefore what we should be aiming for is a structure which involves the greatest number of recycling sites so we can continue to have neighbourhood recycling opportunities. What we have is a very, very efficient pyramid, which works at a very low margin, so it works extremely well, it encourages other forms of recycling and this is clearly going to damage that permanently.

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, but 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.

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 ----

Mr Mitchell: They are buoyant now?

Mr Cottam: Yes, they are. They have come back this year.

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.

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.

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.

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 per cent of end of life vehicles; in the current situation as it is now we are handling 100 per cent of those ELVs.

Mr Marshall: I recall SMMT in the first evidence saying they handle 80 per cent, they handle zero per cent. We have always handled 100 per cent 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.

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.

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.

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.

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.

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.

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.

Joan Ruddock: You want to determine your own processes?

Mr Cottam: Yes.

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.

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.

Joan Ruddock: You would know if only one company out of 2,500 had actually made this investment?

Mr Marshall: Yes.

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 per cent of my business and yet we cannot make an investment decision on them.

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.

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.

Joan Ruddock: What could be done to streamline the process? We have heard from others that there are lots of difficulties.

Mr Marshall: Which process?

Joan Ruddock: The process of planning applications, of licensing, in relation to new directives. Have you any thoughts? You may not have but it is an issue that has been raised by others.

Mr Marshall: Clearly, you can have a model and if the planning authorities referenced against that model, unless it was unusual, I think there might be some assumption that planning would be granted. That would certainly help enormously. I know that government generally is looking to see whether the planning system as a whole can be stepped up. It is a major issue and we are constantly being faced with regional differences, right down to grass roots level. Again, I think this is unfair if the interpretation of regulation varies enormously from one part of the country to another.

Mr Mellor: My consultant engineers were told by the Environment Agency that I would not gain planning permission before I had even submitted my plans.

Joan Ruddock: Before you had submitted your plans to change what you have?

Mr Mellor: We have been told I will not get it by the Environment Agency. They say they will object and we are the major handler of ELV within my council area.

Joan Ruddock: Maybe we can try to pursue that. Thank you.

Mr Mitchell: You said only one firm had made the investment. I can see that you are being messed about and that the authorities do not have a view of how the market works and what need to be done to give it clarity, but surely only one is a comment on the commercial acuity and initiative of your members, is it not? It is pathetic.

Mr Marshall: Absolutely not. We still have responsibilities and therefore funding mechanisms are in the ether so you cannot make plans. One negative aspect of DEFRA and the Agency is they do not have any idea of commercial drivers. On ELV in particular there has not been a recent assessment of where we are. As the regulations have been topped up, bolted on, added to in recent months, no one has said, "What does this mean? Is it affordable?" It seems to me that should be basic, good practice. If you are a business, this is what you do. You say, "What commitment have I made? What will it cost to meet that commitment? Should I then be in that game?" If government is a partner in this, it should also be doing precisely this. At the end of the day, it is driving those costs by defining the system, by defining the routes to the system, and it simply is not happening.

Mr Mitchell: You are quite right but I can also see that here is a market, however it is defined by government, however incompetently it is clarified by government, however much is bolted on. There is a market there and a prospect and anybody with any sense is going to rush to invest, to move towards it, rather than just hanging back in terror. The fact that only one has done so is rather frightening.

Mr Marshall: I do not think we are hanging back in terror. We are waiting to see what the elements are. Many of these players are the same players who are facing the uncertainty of ELV. My members have to sign up by 31 January for a system which still is not yet defined. The final consultation will come out in the middle of January. We still do not know what the costs or obligations are. We still do not know some of the regulatory requirements for something which was imposed on 3 November. This is an outrageous situation.

Joan Ruddock: Is it not a fact that if you do not invest your members are just going to go out of business because the proportion of your businesses that deal with these matters is so large.

Mr Mellor: Maybe that would be the preferred option.

Mr Mitchell: Oh, come on.

Mr Mellor: No; seriously. I go to my bank manager. How can I say to him, "Can you lend me £100,000 against this?"? He will say to me, "Okay. How are you going to get a return on that?" I do not know. I do not have the information.

Mr Cottam: For us to know what future we have in ELVs post-2007, we have to see the next stage of the legislation. We know that the DTI have yet to define what an adequate infrastructure for authorised treatment facilities is. We also know that the vehicle manufacturers are agitating for somewhere between 50 and 500. A figure of a ten mile radius for the public to get to an authorised treatment facility has been bandied about. That would give 300 contracted ATFs throughout the UK from the current 2,700 operators. 2,700 operators can go out there and invest and think they have a business opportunity. Post-2007, 2,400 of them have not. That is why Shane cannot go to his bank manager and justify his investment.

Mr Mitchell: With the fridges situation, the problem was that it not only required investment like this but the equipment they were asked to invest in was imported from Germany and there were delays in getting it and ordering it. What is the case here with the kind of equipment you will be needing to invest in to fulfil these directives, eventually?

Mr Marshall: Some of it does come from Germany in this instance and there will be log jams because the ELV requirement is common across other European land masses. There again, we will have companies who will be told by the Agency that they will have to stop business because they will not be able to implement their plan, because there will be delays in supplying the equipment. I have every sympathy for these people. They do not know whether they have an economic future because elements of this system have not yet been defined.

Mr Mitchell: On the fridges, the Germans and Scandinavians sat back virtuously and said, "Goody two shoes. We have already invested in this equipment and we have it." Is that going to be the case anywhere in respect of the equipment used for these two directives?

Mr Cottam: Yes. Waste electronic equipment recycling is happening in Scandinavia, Benelux and Germany now, so those people have designed pieces of kit that will process this equipment.

Mr Drew: On the issue of DEFRA and their relative under-powered state of inability to deal with the complexities of these issues, what did you need from DEFRA in terms of the type of skills that you have not seen from officials? Is this in any way repairable at this stage?

Mr Marshall: There are two areas. One is the capability to justify actions, pretty basic from my point of view. Constant change is happening and I think that is something that we deserve. Secondly, there appear to be no lawyers within DEFRA or the Agency, so issues can be held up for months and months because no one can translate the desire into the words for the words to be tested by the lawyers.

Mr Cottam: What we need is the three pillars on which we can make sound business investments. One, what exactly do we have to do? Two, how can this be justified and sustained? In other words, who is going to pay us to do it? Three, there is going to have to be effective regulation to ensure a level playing field. On ELV, we are faced with a situation where we have to make speculative investment because the government is two years late in implementing the legislation.

Mr Mellor: As part of the DTI consultation group, I have to say that DEFRA were not always represented at the meetings that we had, which I found bizarre. They are two minutes' walk down the road. I have travelled all the way from Norwich and they cannot be bothered to turn up for a meeting or they do not have the resources to.

Mr Marshall: I would like to add basic project management skills. This is complex. This is not the only thing that DEFRA is dealing with. They look in many directions and I think that is a fairly clear requirement: that you define your objectives early on and you plot your way through it.

Mr Drew: Would it have helped you if you had had a clear ministerial line of responsibility in the sense that there should have been either DTI or DEFRA taking the lead?

Mr Marshall: Absolutely. There are seven agencies involved in ELV. That is, DTI, DEFRA, DVLA, the Agency, CIPA, the Northern Ireland Office and HSE. It is something of a muddle and clearly there is a need for leadership. Also, I think there is a need for political engagement and there really has been very little with the recycling sector over this period. It is unforgivable. It is a major plank of the government's forward programme on recycling.

Mr Drew: What was the nature of the involvement that you had? Were these regular meetings? Were there many of them? What status did these meetings have? What happened - obviously, from what you said, not very quickly - as a result of these meetings? Can you explain the one that was cancelled today?

Mr Marshall: Today was the final consultation which defines what structure we will have for ELV. We still do not know.

Mr Drew: Why was it cancelled?

Mr Marshall: It was cancelled by the DTI. We have had formal meetings on the broad structure which have involved ourselves, the vehicle manufacturers and the major agencies. Where we have seen particular problems have been in the sub-meetings involving officials particularly from DEFRA and the Agency, where you have agreement; you go back and the position has changed completely. There is lack of justification for changes. We suddenly hear that HSE wants to get involved and bolt something on. This is all part of the mystery of the forward plan.

Mr Cottam: As part of the consultation process, we were asked if we would agree to investigate the own marque principle on the basis that all the other options would remain on the table. When it became apparent that we could not agree with own marque because we did not think it was sustainable, we were told that there was not enough time to investigate anything else.

Mr Mellor: We have never agreed with the own marque approach. We said from the outset we could not see it working.

Mr Marshall: All of the independent studies commissioned by government have suggested something else.

Mr Mellor: If we had a central fund mechanism that was going to be put into place, you would see our industry investing in that because they would know they did not have to count on getting a vehicle manufacturer's contract. They would know they will be able to handle every end of life vehicle and be paid for that vehicle. At the moment, all those things are up in the air.

Mr Drew: In terms of the lack of commercial expertise which you have made very clear, surely government can bring in consultants, those wonderful people? Was there any evidence of these people who came from the industry or was this all done in-house?

Mr Cottam: There was notably an Ernst and Young report which suggested a central fund, which was based on a visible fee on the cost of a new car. All sectors involved in the end of life vehicle directive were happy to run with that one, as was the DTI initially, and government took it away. We never had an explanation.

Mr Drew: Can you speculate why it was taken away? Money?

Mr Cottam: It was a political decision because the Tories wanted a stealth tax, I would imagine.

Mr Drew: Producer pressure?

Mr Cottam: No. The producers were happy to run with that.

Mr Marshall: These things are often analysed differently when situations change over the course of time. I mentioned before that there is a systemic bias towards the vehicle manufacturers within government in ELV and that is abundantly clear.

Mr Mitchell: Your position - I am glad you have put it so strongly this afternoon - is quite clear and sharp. If you are told what you have to do, you will invest to do it, but you need the certainty, the clarity and the instructions. The problem is that you do not get either. Whose fault is that? Is it your impression that you have government departments and agencies being dragged reluctantly behind a European regulation they are not quite sure about or is it just that they are keen on the principle but not quite sure how to fit it into the market because they do not have the market skills, the experience or the knowledge of the industry? Which is it?

Mr Marshall: I think it is a systemic bias towards the people who should be paying for it. It is as simple as that. Producers should be responsible.

Mr Mitchell: Thank you very much. I am sorry if I have sat there chortling through some of the evidence, but it is essentially a very sad picture of a muddle that should never have been allowed to happen. Thank you very much indeed.

Memorandum submitted by DEFRA and the DTI

Examination of Witnesses

Witnesses: MR ELLIOT MORLEY, a Member of the House, Minister for Environment and Agri-Environment, MR STEPHEN TIMMS, a Member of the House, Minister for Energy, e-Commerce and Postal Services, MS SUE ELLIS, Head of Waste Management Division, DEFRA, and MR JONATHAN STARTUP, Director of Sustainable Development, examined.

Mr Mitchell: We had some fairly telling evidence from the metal recyclers which has opened our eyes on certain problems of delay, lack of clarity and ineffective consultation. What preparations are you making for a spate or certainly an increase in the number of abandoned vehicles before 2007? Are you expecting a big increase?

Mr Timms: Thank you for giving us the opportunity to be in front of the Committee. Both the directives are environmental protection measures but they also both have a very significant impact on UK businesses, which is why the DTI has been given the overall lead in arranging their implementation, but working very closely with Elliot's department and also with other parts of government. The Environment Agency has a big role in the work that we have been doing. We have an implementation project team separately for the two directives, involving both of our departments, the Environment Agency and others. The fact that the Committee is doing this inquiry at the moment is timely and welcome. We recently published, a couple of weeks ago on 25 November, a consultation paper on the WEEE directive, setting out government proposals for its implementation. We are inviting responses by 1 March. We have narrowed down options for implementation and we are setting out in the consultation document our preferred options for the way forward. We have a programme of regional seminars around the country to follow up some earlier events and an initial consultation that was held last spring. For the ELV directive, again, we are working towards implementation. We regret the fact that we will be transposing the directive late but no other Member State transposed it on time, which I think is significant. Also, the Committee will probably sympathise with our determination to get this right, given the complexity of the issues that we are facing. We emphasised deliberate, careful consultation in our approach to implementation. I gather from what you have just said that there have been some criticisms on that score but we have done quite a good programme on consultation. We have, for example, had an external ELV consultation group in place for two years. With the ELV directive in particular it has been hard to achieve a consensus on some of the key issues, so we now have to grasp the nettle on the most contentious ones, recognising that there will be some people who will disagree with the conclusions that we reach, but there will be a further period of consultation early in the new year.

Mr Mitchell: Why was the consultation paper on the ELV, which was due tomorrow I think, cancelled?

Mr Timms: We are expecting to consult early in the new year.

Mr Mitchell: We were told by the metal recyclers that it was cancelled.

Mr Timms: No. It certainly has not been cancelled.

Mr Mitchell: The consultation paper which was due tomorrow?

Mr Timms: It is going to be published in the new year.

Mr Mitchell: Do we know when?

Mr Startup: We have certainly not had anything which was on the stocks for publication tomorrow which has been cancelled.

Mr Timms: There are some misapprehensions around in this area.

Mr Mitchell: When you say every other state was late with the directive, is that some particular difficulty with the directive?

Mr Timms: I think it has proved to be an extremely complex directive. It has taken us a fair amount of time to get our heads round these things and reach a proposed way forward. I guess that has been everyone else's experience as well. Nobody at all implemented on time.

Mr Mitchell: The problem that the metal recyclers have given us is that there has not been sufficient clarity - I am talking now about the end of life vehicles directive but I think it also applies to the WEEE directive - in the instructions and the decisions made so that they cannot invest as they are going to have to invest to fulfil the intentions of these directives. Until government and the agencies - I accept there is a large number involved - gives them a clear definition of what has to be done and how, they cannot get money from the banks; they cannot invest and they cannot begin to operate. It is getting dreadfully late in the day.

Mr Timms: There will be a preferred way forward in the consultation document that is published in January. In the case of the WEEE directive, there has been much less contention. I hope that it will be much clearer for everybody where we are going on the ELV directive once the document is published in the new year.

Mr Mitchell: The argument has been that officials and departments do not seem to know the way the market operates or what is to be done to kick start investment in this area and it is getting late.

Mr Timms: I do not agree with that. We have certainly been through a very thorough, lengthy process as a result of which we are in a position to put forward a preferred way forward in the document in January. I think that will be based on a good understanding and certainly an enormous amount of discussion with everybody involved. There is a wide range of different parties with an interest in this. There is, I think, quite a good understanding of how the dynamics of this market operate. I accept that some people will disagree with the conclusions we have reached, but I think that is inevitable.

Mr Mitchell: The argument was they had to apply in January and the applications were to go in before it is clear what they have to be doing.

Mr Timms: I do not think they will. We will be consulting in January. The document will be published in January. There will probably be a slightly shorter consultation period than there normally would be because there have been earlier rounds of consultation and then we would hope to be able to lay some regulations in March. That will be in adequate time for people to do what needs to be done.

Mr Mitchell: The clarification I have on the final consultation is that the outcome on the ELV directive, which was due tomorrow, has now been postponed.

Mr Timms: There was nothing due tomorrow.

Mr Mitchell: So nothing in December but something in January? Is that what we are hoping?

Mr Timms: Yes.

Mr Mitchell: What preparations are you making for a festival of abandoned vehicles up and down the country before 2007? Is this a threat?

Mr Morley: DTI are the lead department on this issue. DEFRA is obviously involved on permitting, licensing, and the Environment Agency functions. Although abandoned vehicles are not a DEFRA lead issue in relation to waste management, we do have an involvement in this. In that respect, the government has made additional sums available to local authorities for dealing with the problem. We are not convinced that there is going to be a problem on the scale that some people have predicted, but it is inevitable in the transition period. Abandoned vehicles are a problem now which is why we have put measures in place, not only the funding but also we have given enhanced powers to local authorities in relation to the shortening periods of notification. We have run some experiments. We are giving local authorities powers to clamp and remove cars which are unlicensed. A lot of abandoned vehicles are unlicensed which is not a surprise, because they are often uninsured as well. The problem of abandoned vehicles goes much wider than the issue of the end of vehicle life directive. We do believe that both these directives from the DEFRA point of view are very desirable in relation to the outcomes that we will see. A free take back service for vehicles will certainly resolve the problem of abandoned vehicles which is a very longstanding one that has become worse in recent years. Also, the WEEE directive will help us meet our targets on recycling and reuse. In that respect, both these directives fulfil a very useful role. It is true that the details on the end of life vehicle directive are very complicated. It is not an issue just with our country; it is an issue with a number of countries. There are a number of options that have to be considered about the way forward and that is why there is quite detailed consultation and issues have not been resolved. I do not believe that is the case with the WEEE directive, where I think people are generally satisfied with the way that the consultation process has taken place. We are clear on the direction in which we are going on that.

Mr Mitchell: I am not arguing with the objective of the directives but on a priori grounds surely it is to be expected - it certainly happened in the case of fridges - that if you cannot dispose of them and the fridges could not be taken back to Dixons or wherever to exchange for new fridges, and if you are going to have to pay to get the car disposed of instead of just being able to sell it for scrap metal value, there is going to be an increase in abandonment?

Mr Morley: There is a difference in the case of fridges. The problem with fridges is that there was no capacity at the time to deal with them. We do have capacity for end of life vehicles and WEEE for that matter.

Mr Mitchell: There are various environmental requirements which require investment by the people who are going to dispose of the vehicles.

Mr Morley: Under the new directives that is certainly true but at the present time the main reason for an increase in abandoned vehicles is the value of scrap. Instead of getting a small sum of money from scrap vehicles, now it has changed and you have to pay. The value of scrap has changed. I notice that my own local scrap yards are now offering to take vehicles free of charge and that is a market pressure.

Mr Mitchell: Scrap has gone up now, we are told.

Mr Morley: That is absolutely right. We are not complacent about this. We do understand that there may be a transitional problem which is why we are working with local authorities and the Home Office and looking at a range of measures as to how we can deal with this.

Mr Mitchell: Are you going to help local authorities to face that transitional problem financially?

Mr Morley: Yes.

Mr Mitchell: You certainly had to pay afterwards with the fridges saga.

Mr Morley: That is right. We have made £21 million available in the current financial year and we will make a similar sum available next financial year as well.

Mr Mitchell: What about the registration procedures? Now we have continuous registration by DVLA. Is that going to help?

Mr Morley: We believe that it will make a big difference, yes.

Mr Mitchell: In terms of local authorities, I was struck in north east Lincolnshire which always lags behind north Lincolnshire, I am sure, that the problem of dealing with vehicles being disposed of was (a) finding out the owner which took too long and meanwhile the vehicles was left on the street, was vandalised and eventually became a fire risk so the Fire Brigade then has to have it taken away quickly; (b) there was the development of some pound or protective place where the vandals could be kept away. The vehicles could be towed and there was a waiting period to find out who the owner was. Is this going to be financed on a scale that is commensurate with that kind of problem?

Mr Morley: I am sure local authorities would always argue that they could use more money, but we have certainly made this money available to address problems such as having a secure place to store the vehicles. We accept there is a cost in that. We also recognise that there are hot spots in relation to abandoned vehicles. You find in some parts of the country this is much more prevalent than others. Perhaps north east Lincolnshire is one of them. It does not appear to be a major problem at the moment in north Lincolnshire, but that is because they are all going to north east Lincolnshire. We have identified 30 hot spots around the country where we are working with local authorities, with DTI jointly, the Home Office and DEFRA about how we can give some extra support to those areas where there are particular problems. There are ten schemes set up and running. There has been one in London as well, Operation Cubitts, where we have concentrated on where there are particular problems and I am sure we can continue to do that.

Mr Mitchell: Are these hot spot schemes trial areas which will eventually be extended?

Mr Morley: They could be. They are certainly trial areas addressing parts of the country where abandoned vehicles are a particular problem.

Mr Drew: I think it is fair to say that on the evidence we have taken there is a marked difference in terms of those who have submitted evidence between their confidence in the ELV and the Waste Electrical and Electronic Equipment Directive. We have been told on a couple of occasions that in terms of the government approach to this there are seven different agencies including the two departments. Was there not a need from the outset to have a clear lead in one ministry and all the different component parts reporting to that ministry? From what we have been told, there is confusion with ELV, about who is doing what, about the level of competence within the ability to introduce this, and this is now at least causing a great deal of concern in the metal recyclers.

Mr Timms: The position has been clear. It is a DTI lead with an implementation team drawing on the other agencies that you have described. I am not aware of anyone having been unclear that that was the position.

Mr Drew: You were not present but I am sure you will read the evidence. In the previous session, they were very critical of DEFRA. It is easy for me to blame poor old DEFRA but the arguments go something like this: they felt that the DEFRA team was under-powered, did not have the requisite legal advice, did not do enough responses quickly enough. That is only one part of it but the metal recyclers are key. If we are not going to have a rather difficult period to go through, they are key to how they invest in their industry and they work with the producers to make sure we do not end up with these surplus vehicles.

Mr Timms: We certainly recognise the importance of the metal recyclers as critical players in this. Indeed, I have a meeting with the Association shortly. For that reason as well I will be reading the evidence they gave to the Committee. It is a DTI lead in relation to this so I am not quite sure why the criticism would be levelled in that way.

Mr Morley: I think they are a bit confused. Because it is recycling, they think it might be a DEFRA lead. It is very clearly a DTI lead and I do not accept the criticisms of our DEFRA team, who I think have been working very hard in this and they are very sensitive to the needs of the recycling sector.

Mr Mitchell: The argument was that it takes a long time for investment to come through and to be paid off. There might be a queue for the equipment but we are talking about investment for four, five or six years. To justify that investment, they need absolute clarity in what they are being told to do. They have not had clarity. The officials do not know the market and the way the industry works well enough to give them clear instructions as to what they are expected to do.

Mr Morley: I would dispute that. I think it is in the interests of the metal and recycling sector that we do not rush into this but we take a bit of time to get these details right. I have a suspicion that some of their assumptions on the kind of structures that we put in place may not necessarily be right.

Mr Mitchell: They are asked to apply for licences and make the investment in January next year and they still do not have the clarity they need so that they know whether to apply or whether to make the investment and what in.

Mr Morley: I have some sympathy with that, but there is a number of choices and there are pros and cons to all those, including some favoured approaches from the metal and recycling industries that we need to take into account. Those discussions are still underway. It is not unique to the UK. These are complex issues. All the big European countries who have big car markets and a large number of end of life vehicles are in exactly the same situation.

Mr Drew: When do you envisage this ELV directive coming into law? What is the slowest this could be? Let us go for a happy medium.

Mr Timms: What we are hoping for is that we will publish a consultation paper in the new year and have a slightly abbreviated consultation period on that and then be in a position to lay the regulations in March with implementation in April.

Mr Drew: That is a very short consultation.

Joan Ruddock: I am now getting extremely confused because it sounds as though, on the one hand, the industry should be investing if it is going to meet that timetable but, on the other hand, Elliot Morley has told us that perhaps they should not be investing, the implication being that they should wait until it is very clear that everything has been sorted, but between January and March is no time at all, is it? What is the reality? Should the industry be investing now or not? It seems to me that is a question which has to be posed and which was posed by them to us.

Mr Morley: They need to know and hopefully this will be resolved in the very near future by the preferred way forward. Then we will have a consultation. They can respond to that and then we will be within the timescales that Steve has outlined.

Joan Ruddock: Will they not need new licensing, for example, if they are going to change the operations of some of their sites? New planning consents?

Mr Morley: Some may; some may not.

Ms Ellis: DEFRA was responsible for the permitting requirements of the treatment facilities. The regulations were laid at the beginning of November and they specify what the requirements are for those sites in terms of their technical standards and capabilities. The guidance on that was also issued in November, so the regulations and the technical guidance required for the treatment facilities are already there. The point that the industry was making was that, whilst they might know already what they are required to do on a particular site, they cannot go to their bank manager because they are not sure of the contracting position and the position that the metal recyclers are going to be in with the new system. It is not that they do not know what is required for the sites, because they do, but they do not know who their contractors will be and what the capacity will be.

Joan Ruddock: I appreciate that, but the fact is, even if they know, the consequence of not having the other part of the equation known is that they feel restrained from investing. That is the point at issue here. We heard that only one company out of a potential 2,500 had made the appropriate investment. If that is the case, it seems a great problem to have the industry up and running in a fit state by March.

Mr Morley: I may be wrong but I think they meant one company with a number of sites.

Mr Drew: We are getting the message certainly from one end of this food chain of these types of material disposal mechanisms that you have been a bit soft on the producers. We are talking about ELV. Less so with the electrical equipment. Where there is manufacturing capacity within the countries of the EU, including the UK which we are intrigued about because it is good to know we still do produce cars, it seems that we have been somewhat more laissez faire in the way in which we have approached producer responsibility. What is your response to that allegation?

Mr Timms: We manufacture a lot of cars in the UK and we think that is a good thing. I would imagine the concern being raised is that it is the own marque approach which is emerging as the favoured option.

Mr Drew: That is where they are critical. They do not like that.

Mr Timms: I understand that. There are really two strong arguments in favour of it. Firstly, it is the most natural interpretation of the producer responsibility principle. I think everybody agrees - the polluter pays - that the producer should take responsibility. The own marque approach is a pure implementation of that principle that each manufacturer is responsible for the vehicles that they have produced. I think that is a strong, telling argument in favour of the own marque approach. The second factor, I understand, is where we get into areas where there are differences of views. The second factor is that it is true that the car manufacturers, having been told in no uncertain terms that what was called option four, which they originally came up with, was not acceptable - we were very firm about that, contrary to the wishes of the manufacturers - and having understood that we were not prepared to go down that road, did converge on the own marque approach as their second favoured option; whereas others have argued for different approaches. The fact that it is so closely tied into the producer responsibility principle is a strong argument in favour of the own marque approach, quite apart from the views of the manufacturers.

Mr Drew: The criticism is that this will drive out smaller firms. The only survivors from the waste disposal end will be the larger companies because they will have the wherewithal. Is that inevitable?

Mr Morley: We do not believe it is inevitable in DEFRA and we believe there are ways of shaping the regulations to ensure that that is not the case.

Mr Timms: As I mentioned earlier on, I will be meeting the Association shortly and I will be keen to explore these issues with them.

Mr Mitchell: The metal recyclers argue that it will be the bigger firms that, under own marque, get the contracts with the producers. The smaller firms will therefore find themselves without a guaranteed supply. With the old system of end of life vehicles breaking down because we are in transition to a new one, they are going to have a cost burden which is too heavy for them to bear on the work that is going to be coming through to them.

Mr Startup: We are talking about two stages here in the recycling process. There are the so called dismantlers who take the vehicles in, will depollute them under the new regime and then pass them on to the metal recyclers, as they are called, or the people who run the shredding plants who then turn them into scrap for passing on to the steel industry and so on. The British Metal Recycling Association and that industry are dominated by a couple of large firms as they are. The majority of small businesses are in the dismantling sector. They will continue to contract individually with the vehicle producers to deal through a network of centres with the vehicles of those producers' own marques. They in turn will sell the depolluted hulks of the vehicles on to the MRA members. There can be no guarantee clearly that any given dismantler will get a contract with a producer to be part of their network, but there will need to be a sufficient network of dismantlers to provide the capacity and the geographical coverage to ensure that someone with an end of life vehicle can take it to a reasonably accessible centre and get it accepted back free of charge to the last owner. We will be looking very carefully at the network of facilities that the producers put in place to discharge their obligations and there will have to be a very substantial network to do that.

Mr Mitchell: The network but not necessarily the competition within it, because I can see the metal recyclers nodding in disbelief as you answer that question. On a priori grounds, it must surely be that the smaller people are going to face a much more uncertain prospect as the network is built up and as the producers come to their own contracts with the big boys.

Mr Startup: I do not think we would accept that. The dismantlers as now will continue to take back the vehicles. The producers will need to contract with those covering a large number of facilities. Obviously, there can be no guarantee about any individual plant that they will get a contract, but they will be negotiating with the producers to provide an adequate network. The producers need both the dismantling network and the metal recyclers in order to discharge their obligations just as the dismantlers and the recyclers need the producers to make up any residual costs and provide the vehicles in the first place.

Joan Ruddock: What is a reasonable distance to take a vehicle?

Mr Startup: That will vary in different parts of the country. Ten miles has been suggested as an indicative figure but ten miles within London and ten miles in the Scottish Highlands are rather different propositions. It is likely that we will have a flexible set of criteria against which the adequacy of the network will be judged and we will be looking at them on a case by case basis, rather than laying down one set of hard and fast rules which have to be met regardless of where in the country or indeed regardless of the size of the producer. Clearly, the bigger producers will have larger numbers of vehicles which will need to pass through their network. The networks will need to provide sufficient geographical coverage but also the capacity to deal with the numbers of vehicles of that marque passing through the system every year.

Mr Mitchell: There is a prospect there of these big lorries transporting gleaming new vehicles to market, going back with the junk, the scrap and the abandoned vehicles - in other words, cluttering up the roads.

Mr Startup: The dismantlers' network will need to be sufficient to ensure that someone with an end of life vehicle can access it with reasonable convenience. It will not be a case of handing it over to somebody on the side of a road who will then transport it away, although people may offer to transport it, but the depolluted hulks are already taken from a large network of dismantling facilities to a much smaller number of shredding plants because they have a much larger capacity. That is happening already.

Mr Morley: Individual dismantlers can contract with more than one marque, so they can handle a number of marques at one site.

Joan Ruddock: I notice far more abandoned vehicles in my London borough of Lewisham than I do in the Scottish Highlands. What is going to be a reasonable distance in London? We have heard ten miles quoted elsewhere so ten miles is doing the rounds as though it is going to be ten miles for everybody with an old car, but it is not going to work in London.

Mr Startup: Ten miles was an indicative figure given in one of the earlier consultations but we have never been wedded to that precise figure. I think it is likely to be very much less in London.

Joan Ruddock: I hope so. We have heard a lot of other people's evidence and confusion and concern around who is going to collect, treat, recover and dispose of waste in respect of WEEE. I want to know from either or both of the ministers present what progress has been made in developing a system for distributors and producers to fund the collection and the disposal of WEEE. That is the key point. How is it going to be done? How is the funding going to be done? What can you tell us about the role that you have had in those discussions?

Mr Timms: We published a consultation paper last month, which you will no doubt have seen, making some proposals about how all of this will work. What we are proposing there is, first of all, that we will look to retailers to produce a fund. We proposed £10 million as the level of it to assist in meeting the obligations on the retailers. There will be a need for every single retailer to offer in store return. We have also proposed - I know this is strongly supported amongst the producers - the idea of a clearing house, looking after things like calculating market shares and organising things on the producer side. I think we do have quite a well worked out approach to take forward. I guess that the area where there is still a good deal of discussion needed is on the retail side of this. I think we are making some progress there but there is undoubtedly some work still to be done.

Mr Morley: From the DEFRA side, we see this as very important in relation to hitting recycling and reuse targets. We also see that there is an opportunity for local authorities in relation to the facilities they have for collecting WEEE and recycling it. They will have access to the clearing house. They could also potentially have access to some of the funding to help them develop their collection centres and their recycling centres. We recognise that local authorities do not have responsibility in this. Therefore, we are not expecting them to have additional financial implications as a result of these changes, but we see them as having a role receiving some of the money which the producers will be paying to help them develop their facilities and fulfil that role. I think that will be mutually beneficial on both sides.

Mr Timms: We envisage that of the ten million fund about half would be available for local authorities to be used in the way that Elliot has described.

Joan Ruddock: The local authorities, when they came before us, were adamant that this was not their responsibility. If we are talking about a £5 million funding package, is that likely to be sufficient for all the needs of all the local authorities?

Mr Morley: I think it depends on individual local authorities. Most local authority civic amenity sites have a provision now for the collection of electrical waste and quite rightly so. My local one does it very well. This is an opportunity for local authorities who already have these provisions in place to expand them if they choose to do so and receive finance to do that. That expansion may be also useful in relation to their own local collections. We certainly recognise that it is not their responsibility. We also recognise that if they want to expand their role they should receive financial support to do that. This fund is a way of doing it. It is initial funding and the local authorities can expect to receive about 50 per cent of it.

Joan Ruddock: You say if they choose? There will be no obligation?

Mr Morley: No.

Joan Ruddock: A local authority that does not develop this facility will not be under pressure to do so?

Mr Morley: Not under the WEEE directive. As you well know, local authorities have obligations under our reuse and recycling targets. That is somewhat different.

Mr Timms: Could I add a little to that. I mentioned the £5 million figure and we expect that to be the value of the fund in each of the five financial years in 2005-10.

Joan Ruddock: In each year?

Mr Timms: Yes, it is an annual amount. There is not a mandatory requirement, as Elliot has said, although my impression is there is actually quite a high degree of enthusiasm on the part of local authorities to improve their facilities and this does give them access to some funding to do so.

Joan Ruddock: We heard that there is no doubt from the point of view of small retailers, for example, they did not think a bring back system was in any sense going to be appropriate to them and they thought it was much more effective to have local authorities collect, and I think we all understood that. The ESA specifically said to us that they thought that civic amenity sites were absolutely critical to this whole process. Are you agreeing with the ESA, despite the fact that there is going to be no obligation on local authorities? Do you believe that civic amenity sites have a critical role to play?

Mr Timms: Certainly I agree they have got a very important role to play. As Elliot said, I think the evidence we have is about half of current civic amenity sites already provide separate collection for WEEE and it would cost about £12 million to increase that by another 30 per cent. So given that stream over the next five years ----

Mr Morley: Annual funding.

Mr Timms: ---- there is an opportunity to significantly increase the proportion and I think local authorities will want to do that.

Mr Morley: Through our rep schemes and funds we are developing a market for recyclets, including metals and some of the by-products of this. Local authorities might find that to their advantage. If they increase their collection of WEEE it does count towards the targets which they are obliged to follow. There are advantages for them in relation to participation. There are also community groups who refurbish electrical items like washing machines and fridges, for example, and they would also want to be involved in the scheme and the collection as well.

Joan Ruddock: Do you think anything needs to be done to make the expansion of the CAs more straightforward? We heard possibilities of difficulties with the kind of arrangements that would need to be made, particularly where the facility will have to be made much larger to take the much larger proportion of materials and there may be licensing issues.

Mr Morley: It might be the case but, there again, from the local authorities' side of collection it could be to their advantage in relation to improving their facilities generally and receiving some financial support for it.

Joan Ruddock: Where will that financial support come from?

Mr Morley: From the fund.

Joan Ruddock: From the same fund?

Mr Morley: That is right.

Joan Ruddock: There are no additional monies on the table anywhere, are there? This is the money that they will have to make this possible.

Mr Morley: In relation to WEEE, although there are additional funds for waste recycling generally which are administered by my department.

Joan Ruddock: Okay. One point that could be seen to be quite a small one but I am very passionate about it, I have to say, is I have had great difficulty persuading the House authorities over many years to put recycling in this building, the whole of the estate, the latest of which has been printer cartridges. We have received written evidence suggesting that printer cartridges should be included whereas we understand that they are not included. I just want to pursue with you why that should be. We have been told, for example, that over the lifecycle of a laser printer, ten times more waste by volume results from the replacement of cartridges than does from the disposal of the printer itself. I have to say that is quite consistent with what I see happening in my own office. Why not?

Mr Timms: You say it is a small issue but Elliot and I were talking about this outside and it is certainly by far the biggest issue in terms of the postbag that I have received, and I think Elliot has received as well, and has attracted, rightly I think, like you, a very high degree of public interest. I think the position is that the Directive as it is drawn up does not cover consumables. Printer cartridges are consumables and they are just not in the scope of the Directive, unless they happen to be in the product when it is discarded. I think the concern, which I completely share, that manufacturers should not be doing things to stop cartridges being recycled is a very fair point and I agree with it, but it is not something that is to be addressed through the Directive. The Directive is about finished, complete equipment rather than about the consumables that the equipment uses.

Mr Morley: I think the concern is the so-called "killer chip". This is not associated with Grimsby's very fine fish and chip shops, I have to say. The concern is that this encourages manufacturers to have a chip which makes it impossible to refill and reuse the cartridge. I have every sympathy with that, I think that goes against sustainable production and consumption. It is a trade issue, it is an argument about how companies operate. I think it is a serious point but it is separate from this particular Directive. I want to see this industry do well, it is an important one, it is about sustainable reuse and I very strongly support that. I think there are ways of addressing it without it necessarily being within the Directive because, as Stephen says, whether we like it or not the advice is very clear that it is not within the scope of the Directive.

Joan Ruddock: So we will have to address it elsewhere?

Mr Morley: Yes.

Joan Ruddock: Thank you very much for that. Finally, what lessons do you think have been learned from the implementation of the ELV Directive which now has produced what I think by consensus is a much better approach to the WEEE Directive? In a nutshell.

Mr Timms: Let me start and then I will ask Jonathan to comment on this. I think we have been through a rather difficult process over a period with a succession of these measures and I think we have got better each time as a result of learning from the previous ----

Mr Mitchell: So you should after the mess of the fridges.

Mr Timms: Certainly there were some lessons to be learned from that experience. Essentially what we have to do and what we are doing, with the ELV Directive as well, is engaging fully and in detail with all of the parties affected in order that we have a good understanding in government of the way the affected industry works and can frame the regulation correctly and get the judgments right that go into making that. Jonathan, let me ask you to comment on the lessons that we have learned.

Mr Startup: I think from the Department's point of view, first of all the two Directives, although they are producer responsibility Directives, are very different. For instance, the End of Life Vehicles Directive is concerned with a relatively homogenous product with, albeit quite a large number of businesses, a limited number of players in terms of the part they play. The Waste Electrical and Electronic Equipment Directive, of course, affects potentially a very much wider range of products because of its scope. I will qualify the point by saying that you are looking at different processes and different kinds of measures here. As the Minister said, I think we have got better at consultation. Even as we have gone on we have tried to keep close to the industry. Obviously we cannot satisfy everybody all the time but we have tried to ensure that the industry are aware of what we are doing, that we are talking to them as the policy develops rather than just coming out with a proposal in a consultation document and expecting reactions to it. With the WEEE Directive, of course, because of the number of businesses affected and the relatively low levels of awareness, we instituted, even before the Directive was finally concluded in conciliation last year, a series of seminars up and down the country to increase awareness and to enable people to ask questions and for us to explain proposals. We have been running those jointly with Defra and with the involvement of the DTI's Small Business Service. The other point which I think is now thoroughly embedded and is a reflection of some of the changes that have taken place within DTI itself and other departments over the last few years, is the much more conscious and deliberate application of a project management approach so that we see the task of negotiating and then implementing a Directive in terms of a project with certain milestones of things that have to be met. We have tried as we have gone on to apply project management disciplines. At the end of the day, of course, the timetable is not always within our gift and we are concerned that we get it right rather than we are simply driven by the need to produce something on a set date. That has been particularly the issue with the End of Life Vehicles Directive where because of the very strong, and quite understandable, views of the different players in the market we have gone back to them a number of times and there have been several iterations of this consultative process after the very first consultation carried out several years ago with refinements of the proposals, and we are still doing that now, hence the delay in producing the latest consultation.

Mr Drew: The role of the Environment Agency in terms of both Directives is going to be key. Can I ask you - I presume Stephen will give a slightly different perspective from Elliot - what new resources are the Environment Agency going to get to deal with this? I am more interested in the expertise rather than the pure cost base because clearly, if what we have been told is true, there does seem to be a lack of expertise currently available. I would just like to know where are we going to get these people from who are going to come in and do this work?

Mr Morley: If I can deal with the environment side, which is a responsibility for Defra. The Environment Agency overall has a budget increase. How it allocates its budget is a matter for the Agency being an autonomous body and it makes its own priorities in relation to the workload that it has. It is fair to say that the Agency is on a rising curve of responsibility at the present time and we do recognise that within Defra within the restraints that we have ourselves in relation to our budgeting. It has received an increased budget and we do talk to the Agency about the way it approaches this. I should think there is an awful lot of expertise within the Agency. I think sometimes when people say they do not understand, it is usually code for "will not give me what I want" generally speaking. I am not at all convinced by that particular argument. I think that the Agency does work very hard to try to understand the needs of the various stakeholders it deals with and tries to advise them and support them in relation to the changes which are coming through. That is what we would expect them to do from Defra and it is the kind of approach that we would want to encourage.

Mr Drew: Can I just be clear where you perceive this fitting within the Environment Agency and what area of responsibility, or will these be completely new sectoral arrangements within the Agency?

Mr Morley: I think the main interface would be permitting and in that sense permitting is nothing new for the Environment Agency, it has been established for a very long time.

Ms Ellis: It will just be an extension of what they do already. They already license and inspect and monitor and enforce facilities that are recycling both end of life vehicles and waste electronics equipment. What it will be doing is just an expansion in terms of the fact that there are very specific requirements for those treatment facilities within both Directives. It is really only an extension of what they are doing now. If there is licensing, permitting activity involved then the Agency does recharge on a full cost recovery basis for that work, so in that way it will be funded as they go along.

Mr Drew: I suppose the corollary of that is the degree to which the Agency, at least in its early incarnation of having to take responsibility for this, will exercise a light touch or are we going to be hard from the word go? In a sense we are caught between the devil and the deep blue sea. If we go in with lead boots on, we could end up with a lot of companies going under because of unwillingness to meet these standards, but if we are not tough we are going to end up with a lot of abandoned cars under ELV or abandoned pieces of electrical kit. You are damned if you do and you are damned if you do not.

Mr Morley: I think the answer to that is the consultation process and the reason why we are trying to get this right. We are under an obligation to apply these regulations and we run the risk of infraction ourselves as a Government if we are not applying the European Directives and regulations properly. There was a point I was going to add to what Stephen was saying in terms of lessons learned. One of the reasons why I think the WEEE Directive has been going a lot better is that it is a lot more flexible as a Directive and that is a lot to do with a lot of the input from PUK. Sometimes these regulations are embraced very enthusiastically without thinking about all the difficulties and problems that go with that. We have a responsibility as well as a Member State but it is an issue that we need to resolve in the formulation of the Directives to address some of these addresses properly before they are framed and put within a timescale and then there are arguments about interpretation and what applies and what does not, which you do get from time to time. That is just an aside on that particular point.

Mr Drew: Is this an industrial mindset, that it is easier to deal with the industry in terms of electrical kit but cars - to put it bluntly - are big boys toys and they do not break down metaphorically ----

Mr Morley: I think they do.

Mr Drew: ---- into the nice caring, sharing, "we are going to sort this out" industry, there is a degree of conflict in that industry?

Mr Morley: I do not know whether it is actually conflict within the industry. I do not think it is unreasonable that people within the sector in relation to end of life vehicles want to be clear about where things are going. There have been some differences of opinion legally on interpretations of what applies and what does not and they need to be resolved. We have a role in that to give clarity and that is what we are attempting to do. I think that is why there has been a difference between the two particular Directives. I think one has been framed in a much more flexible way, a much more thorough way, than the other.

Mr Drew: One last point, which is slightly at a tangent from looking at the role of the Environment Agency, but we did not pick it up and we should have done. That is the stage at which for the ELV the central fund idea was dropped. When did that happen and why did it happen?

Mr Timms: This was in the early process of setting out the options. Originally, as I mentioned earlier, there were four options that were proposed. There was one of those around targeted tonnages, if I remember rightly that was the expression that we used for that, and in the light of the consultation we decided not to proceed with that. Again, I would point to the advantages of implementing this Directive in a way which gets us as close as possible to producer responsibility, which is a principle that everybody agrees with and which is very clearly, very strongly reflected in what is now the lead option, the "Own Marque" option.

Mr Startup: The idea of a fund was one amongst many options that emerged from the original discussions. I think there were concerns about how efficiently it would operate and whether it would represent full and effective producer responsibility. As the Minister was saying earlier, we concluded that the "Own Marque" approach represented the purest form of producer responsibility and that is why we have been concentrating on that one.

Mr Drew: We were told - Elliot will come back in in a minute - that your own Ernst & Young report, which you commissioned, was very supportive about the idea of a central fund.

Mr Startup: Ernst & Young were quite supportive of it, it is true, but the issue was not simply whether it could be made to work, which undoubtedly it could, but whether it would provide the real producer responsibility that we were looking for, and indeed whether it would be acceptable to all the players in the industry. The problem with the consultation on the End of Life Vehicles Directive was that there were any number of options but no one option emerged which all the players were able to agree on, which is why in a sense we find ourselves having to take the judgment of Solomon and say what we think will best deliver the requirements of the Directive.

Mr Morley: I think that is a fair point. It is one of the problems of the End of Life Vehicles Directive that there are a number of approaches and each approach has pros and cons and we have to try and weigh those up. A central fund has advantages and disadvantages. One of the disadvantages of a central fund is that it is more likely to be passed on to the consumer, the cost of that central fund, while the approach that is under discussion of marque liability is that there is an element of choice between manufacturers about how they do this in their contracting with dismantlers and taking it back and there are going to be different levels of contracting and market decisions about whether that is passed back on the prices or whether, indeed, it is absorbed within the company. There is more chance of it being absorbed and more connection with producer liability in that kind of approach than others. I accept that all these different approaches have their different advantages.

Joan Ruddock: On that very point as to whether the producer pays principle actually ends up with the consumer paying. I hate to ever quote the Daily Mail but I am told they have informed their readers that they are going to pay £12 for a television and 70p for a vacuum cleaner under the new Directive. I think we want to explore with you the extent to which the producers will indeed pass on the costs of this exercise to the consumers?

Mr Timms: It is clearly to be a matter for the manufacturers. There is a cost, there is no question about that, and it will be for the producers to decide how they manage that. I think it is worth making the point that there are some important opportunities for producers here as well because there is scope certainly for innovation in product design which will allow these costs to be reduced and conceivably, I think actually quite likely, some opportunities for competitive advantage to be gained from producers addressing the recycling issue in an innovative way. There will be costs and whether manufacturers choose to pass those directly on to the customer, to absorb them in some way, will be for them to determine.

Joan Ruddock: On those opportunities, do you think that redesign is likely to make recycling cheaper? Is there evidence being collected to this end? How much do we know about the process of incentivising, for example?

Mr Timms: Certainly I have had conversations with manufacturers who have been very positive about the opportunities for them to be clever about the design and seeing for themselves some commercial opportunities. If they can design their products so that they are more easily and readily recyclable then that is a commercial benefit for them. I think that is an important benefit, not just of the Directive but of the way we are implementing it, that there is scope there for manufacturers to be creative and innovative.

Mr Mitchell: I wonder if it is going to be a large benefit. Producers produce for a world market and Europe is only a part of it. While it might be an imperative for the European producers now to produce designs that will be more easily disposable, it is not going to have much impact on China where most of the manufacturing is done, is it? That is a hope rather than a real prospect.

Mr Morley: You can turn that argument around. You are quite right that a lot of manufacturing has moved to China but a lot of the market is within the European Union. We are already seeing what I regard as undesirable in that, for example, it is cheaper to weld parts of washing machines or white goods than to screw them, it is just cheaper, and it makes it harder for them to be repaired and to be recycled. Again, we ought to have at the back of our minds a policy of sustainable production and consumption and these kinds of Directives do bring about quite desirable changes in the design of a range of electrical goods because they will have to be recycled, and it is part of the obligations upon them. I think there are some really quite desirable results of this and I think it will spread to countries like China because of the size of the EU market.

Mr Timms: There is a good deal of interest in this subject in other parts of the world as well, in the US and certainly Japan. It is not only Europe that is looking at these issues at the moment.

Mr Startup: If I might just mention that members of my team have attended seminars in both China and Japan with the electronics industry and there is a great deal of interest in the opportunities as well as the other issues raised by this Directive there.

Mr Mitchell: These are likely to be at the forefront of a wave of Directives to come and it looks like we are embarked on a gradually learning process up from fridges.

Mr Morley: Up from fridges.

Mr Mitchell: Are you likely to put new structures in place to ensure that the implementation is smoother in later stages? What have we learned from these two and the fridges?

Mr Morley: Certainly I think we have learned that we must have an adequate run-in and preparation period in terms of preparing for these kinds of changes. Also I endorse what has been said about the structures of consultation, good and effective consultation is very important.

Mr Timms: I would echo what Elliot said earlier about the need for the Commission as well to learn and to work out what works well and what is easy to implement and what is hard.

Mr Mitchell: Thank you very much, it has been very interesting. It is unfortunate, in some senses, that we could not bring the metal recyclers up here to take our place to put the point that they were signalling from the back. I cannot read semaphore since my Boy Scout days. We are grateful.

Mr Drew: It would be an interesting meeting, Stephen.

Mr Mitchell: Thank you very much.