Memorandum submitted by Biffa Waste Services
Ltd
Biffa Waste Services is the largest waste management
company operating in the UK and can justifiably claim to be the
most diverse in terms of its spread of interest in industrial/commercial
and domestic collection, landfill, liquid waste and specialist
hazardous waste management systems. The company has a turnover
of around £760 million at a current annualised rate and is
also in the top three waste management companies operating in
Belgium. We are wholly owned by Severn Trent Plc with over 150
operating centres throughout the UK. We handle 14 million tonnes
of material that is treated, landfilled or recycled on behalf
of an extensive customer base exceeding 85,000 in the public,
commercial and industrial sectors plus collection services to
1.3 million households.
I. SYNOPSIS
Our response comprises an underpinning element
of support for the work of the Environmental Taxation Team within
the Treasury but suggests that they labour under a more general
perception problem within the Department in terms of their significance
and relevance as part of the wider commitment to economic growth
and development of the Economy. As a result—at Departmental
level—the Treasury can be criticised for their track record
in relation to environmental taxation in respect of the following
broad issues:
(ii) Externality Economics.
(v) Data and Management Information Systems.
These areas of potential weakness can be offset
were it possible to foster a more proactive framework to environmental
strategies. At the moment these appear to be seen as extraneous
to mainstream "internality" economic policy development
whereas they have the potential to reinforce, actively, mainstream
strategies in key areas of government spending. We thus suggest
that a more cross cutting approach within the Treasury in terms
of . . .
(b) Funding for a national resource flow
data capture information system.
(c) Integration of environmental accounting
with supply chain economics.
(d) Establishing a common measure for value
assessment in environmental terms (such as CO2 abatement).
(e) Active involvement in Greening Government
initiatives through public sector procurement and policy implementation.
. . . could all produce substantive benefits in terms
of value for money, cost effectiveness, and abatement of environmental
risk in extant areas of government spend.
II. SPECIFIC
ISSUES
Environmental taxation as an instrument of policy
has moved a long way in the last 15 years but it is still nowhere
near the level of significance which should be attached to it
given the range of scientific evidence building up with regard
to the scale of future abatement costs of current, so called,
environmental "externality costs". The latter debate
has advanced most in terms of carbon dioxide, global warming,
and climate chaos, yet the level of taxation and fiscal instruments
as a share of GDP is still tiny, and in recent years has declined.
This suggests a lack of concerted commitment to the philosophy
of using economic instruments to modify supply chain behaviour
on a whole life cycle basis. Specific manifestations of that
lack of commitment are:
(i) The Pace and Scale of Implementation
Most obviously, as an example, we would cite
the timorous approach to the implementation of the landfill tax.
The introduction of the tax—at £7 per tonne—was
originally based on an academically focused approach, heavily
reliant on cost benefit approaches to avoided costs. With the
benefit of hindsight we now understand, more comprehensively,
the need to tax landfill at a rate where alternative competitive
(and more environmentally benign) technologies can operate competitively.
The reality—increasingly underpinned by government funded
work within the New Technologies Working Group (NTWG)—suggests
that most of these technologies need gate fees of £35 and
above to compete effectively. Having absorbed that suggestion—after
eight years' operation of the tax—the government are now
moving in £3 annual stages to a £35 tax rate—effectively
charging an economic "rent" to shift behaviour. Unfortunately
this whole process will have occupied almost 13 years, at a time
when the pace of technological development has accelerated far
more quickly. The compounded effect of this temerity has been
to delay crucial investment in the necessary new facilities and
infrastructure by making them "unbankable" compared
to the landfill alternative. We suspect that this temerity is,
in turn, fuelled by an underpinning belief within the Treasury
that "The Environment" is somehow extraneous to mainstream
business activity—something that is nice to have if we can
afford it.
(ii) A combination of this temerity and
the extended timetable has resulted in a plethora of multiple
funding packages ranging from investment breaks, subsidies, research
grants, minimisation initiatives, etc, etc, which are very difficult
to track down and identify collectively.
On the whole we suspect that the total level
of disbursements roughly matches the amount collected—thus
adhering to the Chancellor's original statement that environmental
taxation would be fiscally neutral—but nevertheless there
are suspicions that the flows of these disbursements have now
precisely matched the flow of income streams with the result that
there are transfer payments between individual taxation groups
and recipients (between private and public sector and in terms
of intra sectoral flows). There is thus an impression of numerous
initiatives and much activity but one must question the quantitive
and qualitative results in terms of outcomes.
(iii) In terms of value for money one must
thus question the value for money of these outcomes—particularly
in terms of the high profile policy implementation debacles such
as CFCs (fridges), and the Waste Electricals and Electronics Regulations
(WEEE). An estimated £800 million per annum of environmental
taxation flows in the waste area have been employed, and dispersed,
in ways which have produced less than desirable outcomes in key
areas of policy implementation as a result of the lack of funding
to create more macro economic approaches to the whole issue of
pollution and environmental improvement. In the public sector
arena, funding has admirably been made available within the PFI
framework without questioning whether this is the most appropriate
mechanism for offsetting relative differences between raising
funding from public or private sector sources. Relatively little
funding has been made available to tackle more fundamental issues
in relation to the development of the necessary planning infrastructure
at regional level to replace the waste processing capacity currently
contained within 200-odd landfills, which will be filled up, and
not replaced, between now and 2012.
(iv) Data
We understand that £5 million or less has
been made available to the Environment Agency to develop and implement
a waste data collection network through the use of advanced information
technology data capture systems. We are involved in, and supportive
of, this programme but believe that a far more holistic and comprehensive
"cradle to grave approach" is required to the whole
issue of resource flow management in the economy. In December
2005, the EU announced a major shift in their approach to waste
strategy by confirming that waste was a manifestation of upstream
production and supply chain systems and that—as such—waste
strategy should be seen in the context of whole life cycle production
strategies for particular products in individual sectors (food,
electricals, automotive, clothing, etc). Funding levels of £20
million or more would be appropriate to develop a UK wide resource
flow information database to satisfy this cradle to grave approach.
Reluctance to commit to such a data capture
network is puzzling, given that precisely the same approach is
adopted with regard to the flow of financial assets in the monetary
economy. The Treasury have an intimate understanding of the flows
of all the monetary measures from Mo-Mxx (everything from cash
in people's pockets through to the location of financial assets
in terms of bank deposits, mortgage lending, fiduciary deposits,
short-term lending, long-term lending, international transfer,
etc, etc).
As a consequence the Chancellor is able to determine
how best to regulate any overheating or cooling in the economic
structures of the UK by the application of judiciously applied
accelerators or braking mechanisms, working on an arm's length
basis with the Bank of England Monetary Committee. Over the last
30 years, the quality and extent of that management framework
has improved by leaps and bounds, and much of that improvement
is founded on the availability of online data capture systems
measuring the flow of financial assets on a double entry bookkeeping
basis across a sophisticated economic system. It is our belief
that before environmental taxation and fiscal management can be
developed with any degree of quality, we need a similar data capture
system for resource flows in the economy as a whole, and it is
the Treasury's responsibility to find the funding to kick-start
that process for the appropriate department to implement.
So . . .
III. OPPORTUNITIES
In a sense, we are not at the beginning of the
end—we are at the end of the beginning (to paraphrase Churchill
in relation to El Alamein).
In fairness to the Treasury, they are receiving
information on available options second hand from relevant specialist
Departments—primarily DEFRA. Correspondingly, those Departments
may or may not be adequately informed with regard to how available
economic mechanisms might be applied most appropriately—what
is needed is a higher level of round-tabling approaches developed
with confidence and commitment. So what are the features of a
more proactive combined strategy involving cross-departmental
approaches—Non-Governmental Organisations (NGOs), industry,
and local government? We would suggest that the following are
key features.
(i) Cost the Target
Sufficient is known on a departmental basis
with regard to the necessary standards for environmental compliance
in terms of air, ground and water. If one were to consider that
evidence for delivering substantial improvements in the environmental
quality of life in the UK, there is reasonably high quality, informed,
and peer reviewed quantification of the economic costs. Broadly,
these amount to between £20 billion and £30 billion
per annum for the UK economy. That figure comprises approximately
£10 billion per annum for the cost of delivering the EU Drinking
Water Directive, £8 billion for delivering the new Waste
Strategy with substantive reductions in reliance on landfills,
and the development of a brand new infrastructure costing approximately
£10 billion of capital investment (for recycling, energy,
and soil manufacturing facilities), and £12 billion+ for
delivering full Integrated Pollution, Prevention and Control (IPPC)
standards in the cement, chemicals, automotive, engineering, and
electrical generation sectors. Admittedly these are ballpark figures
but the informed consensus appears to be that we are talking about
an annualised incremental impact on GDP of not less than £20
billion and not more than £30 billion each year.
The mindset in the Treasury appears to feel
that these costs are somehow a threat to our competitiveness,
job creation capability, and general economic wellbeing. Viewed
from within the environmental services sector, we would suggest
that quite the reverse is true—expenditure on these items
will produce positive benefits to society in terms of quality
of life, health, wellbeing, jobs, security, and international
competitiveness. In short, environmental investment forms part
of the next industrial revolution and we should be embracing these
opportunities, rather than seeking to defend ourselves from them.
It would be helpful if the Treasury were to be more explicit
in its adoption of the latter approach, rather than the former.
(ii) Data
We have already referred to the parsimonious
approach in funding for the Environment Agency with regard to
implementing a cradle to grave resource flow data capture information
system. We believe that levels of funding in this area should
be stepped up for the Agency and that the value for money criteria
of this expenditure be closely scrutinised in terms of defined
offset benefits such as:
— Avoided expenditure on fly-tipping.
— Anticipating the impacts of environmental
crime.
— Ensuring that fiscal and budgetary
environmental pricing strategies are more finely attuned.
— Assisting the resource efficiency
of specific industrial supply chains.
(iii) Supply Chain Systems
Much of the environment disbenefits faced by
society today originate—both historically and on an ongoing
basis—from entrenched technologies and methods of production
in discrete supply chains (food, furniture, clothing, automotive,
chemicals, etc, etc). Given the commitment to the development
of a national online database in resource flow accounting, it
would be possible to integrate revenue expenditure, investment,
subsidies, and tax breaks for environmental improvement into those
specific supply chains in a far more focused fashion. Many of
the environmental disbenefits faced by society—in terms
of solid waste, gaseous and aquatic emissions—originate
from long established methodologies of production, based on a
historic cost infrastructure. The challenge of the environmental
economy is to face the need for adaptation, product reformulation,
and substantive shifts in the methodologies of component use and
composition. The UK is in a leading position to accelerate these
supply chain shifts—whilst at the same time ensuring consumer
demand is satisfied but by using far more environmentally "sound"
production systems. Those systems will be in great demand in coming
decades with the prospect of continuing rises in the global population
and an increasing proportion of that population which expects
to enjoy higher standards of living. Basic production systems
are being exported from the UK to these developing economies at
a fast pace—the opportunities presented by refining those
production systems, together with the associated research and
development, IT, and systems integration, represents a very real
opportunity for the future economic growth of the UK economy.
(iv) The Treasury needs to evaluate the
cost/benefit of any environmental policies against an environmental
yardstick. It is insufficient to relate this back to crude measures
such as tonnages or financial data. As a result, we suggest the
Treasury should commission research work to establish what type
of common yardsticks might best serve that purpose. We would suggest—given
recent statements by the Prime Minister—that most logically
these would relate to carbon/CO2 avoidance and abatement. It is
likely that the valuation of carbon/CO2 will be increasingly refined
through the climate change mechanism in coming years and it would
thus be possible to find a linking mechanism between the financial
economy and the environmental economy, through the measure of
carbon. Such valuations would be underwritten by Tradeable Permit
systems, which reflect practical operational market valuations
arrived at on competitive trading flows.
(v) Value for Money in Extant Environmental
Strategies
By this we mean the avoidance of "negative"
expenditure on policy development which might otherwise sour.
Looking back, examples include the WEEE Regulations and attempts
to abate CFC releases from refrigeration devices. Attempts have
been made to determine Regulatory Impact Assessments (RIAs) but
if these were carried out ex post, the cost per tonne of removing
CFCs would be phenomenal. We suggest that if some of our recommendations
above had been carried out, the focus, timing, and precision of
taxation and regulatory action would give far better value for
money. The most obvious area where the absence of any holistic
data collection system will bring immense costs lies in the probability
that by 2010 the remaining landfill capacity will be able to charge
exorbitant prices until replacement new technologies are brought
online, on a scale anywhere near capable of absorbing the current
level of material flows (without allowing for growth). Expenditure
now in the above recommended areas will bring considerable savings
in five to 10 years in terms of accelerating capacity provision
in the waste area.
More proactively, whilst we recognise that the
Treasury take a "hands off" role in relation to the
quality of spend in Departments with high environmental impact
(Health, Home Office, Education, and Transport, etc), there is
a case for suggesting that it could facilitate investment in macro
economic evaluation of the environmental expenditure of these
Departments in areas such as waste management, energy, water use,
and raw material purchases. As a cross cutting Department, the
Treasury is in a key position to understand the need for more
strategic implementation of green procurement systems on a cross-departmental
basis and its ability to evaluate the scale of that impact puts
it in a prime position to drive innovation in areas such as recycling,
green energy procurement/investment, stimulation of reclaimable
product reuse, and the reformation of design specifications for
specific high volume product purchases in areas of government
procurement as diverse as paper, information technology equipment,
road vehicles, building specifications, and heating fuel supply
systems.
We hope you find these suggestions useful and,
if there are any points on which you require specific clarification,
suggest you will not hesitate to get in touch. We are also appending,
for information, a copy of a paper prepared by Dr Catherine Mitchell
of Warwick University, in relation to the specifics of economic
strategy in relation to waste and waste strategy. This is pertinent
to some of the earlier points we were making with regard to policy
development.
January 2006
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