House of Commons - Communities and Local Government Committee

Select Committee on Communities and Local Government Committee Sixth Report

Paying for refuse collection

1. On 29 October 2007, the Government announced that a maximum of five waste collection authorities in England would be allowed to introduce pilot schemes offering householders financial incentives for improved recycling performance.[1] On 15 November, the Minister for Waste, Joan Ruddock MP, said that for the first time "authorities will be able both positively to reward those who recycle and charge those who do not."[2] Subject to parliamentary approval, the schemes will be given legislative force by the Climate Change Bill. This Report is intended to contribute to debate on the proposals contained in the Bill, which is currently passing through the House of Lords and due to be considered by the House of Commons later in this Session.

2. The Government announced last May in the Waste Strategy for England 2007 that "the option to introduce [a financial incentive] scheme would be available to all Waste Collection Authorities (WCAs) in England."[3] There was at that time no intention to restrict the schemes to only five of England's 354 local authorities; nor were pilots thought necessary. The United Kingdom is the only one of the 15 older European Union (EU) member states that does not allow its local authorities to make separate charges for waste collection. The UK also sends more municipal waste (63 per cent) to landfill sites than all but Greece and Portugal. Landfill sites produce methane, one of the most toxic greenhouse gases, and are responsible for 3 per cent of UK greenhouse gas emissions.[4] EU directives require the UK to reduce the amount of waste it sends to landfill to 75 per cent of the 1995 total by 2010, to 50 per cent by 2013 and to 35 per cent by 2020. Failure to do so will result in substantial fines, and the Government has the power to pass those on to councils, potentially driving up the costs of waste management and resulting in significant council tax increases.

3. Local authorities, primarily through the Local Government Association (LGA), have sought a charging power for several years. Sir Michael Lyons, following his two and a half-year inquiry into local government, recommended last March that authorities should have the power to charge and should be able to raise revenue by doing so.[5] The Government accepted the first half of that recommendation but rejected the second, preferring "revenue-neutral" schemes under which councils would return all money collected to residents. The Local Government Minister, John Healey MP, told us in December that the Government was "not interested in pursuing" Sir Michael's aim in that respect "because we do not wish to add to the charging tax burden of the local population."[6]

4. After the Waste Strategy was published in May, the Government's proposals went out to consultation and met a mixed, but not markedly negative, response. Local authorities largely favoured the financial incentive scheme plan; private individuals were "evenly divided between those who agreed … and those who did not".[7] Questions were raised about the concept of revenue-neutrality, focusing particularly on allowing local authorities to pay the set-up and administrative costs of schemes from revenues raised, but the consultation responses broadly favoured the principle of allowing councils to introduce their own schemes if they chose to do so.

5. In July, in our Report on Refuse Collection, we noted the timidity of the Government's proposals, pointing out that councils would be unlikely to introduce schemes that raised them no money, that householders would object to paying additional charges for a service they believe they already pay for through council tax, and that the Government's proposed schemes offered comparatively paltry returns to those who recycled more of their waste. We criticised the Government for making a "half-hearted tilt in the direction of charging" householders directly for the collection of their rubbish.[8] It has since, in the face of highly negative media coverage, mounted a wholehearted retreat from even the limited policy outlined last May.

European experience

6. The Government has chosen to restrict the number of schemes to just five to allow it to learn what might work best in the UK. The Minister for Waste and the Minister for Local Government have, however, repeatedly made the case to us that there is widespread experience of recycling incentive schemes and waste charging systems in European Member states. Broadly, four types of scheme operate in other European countries:

bin volume-based schemes

weight-based schemes

frequency-based schemes

sack-based schemes

Among the other 14 older EU member states, charging systems are widespread in Austria, Belgium, Finland, France, Germany, Luxembourg, the Netherlands and Sweden. Charging is compulsory in Ireland and due to become so in Italy. Various schemes operate in Denmark. In the remaining three states, local authorities have the power to charge but do not use it, and these are Greece, Portugal, and Spain. Landfill volumes in these three countries, as in the UK, are at the bottom end of the league table.[9] Daniel Instone, the Head of Waste Strategy at the Department for Environment, Food and Rural Affairs (Defra), told us several lessons had been learned from EU-wide experience:

… you get improved levels of not only recycling but also waste prevention; you get lower levels of waste than would otherwise be the case ... so you have these double benefits on the plus side. But you also have savings to local authorities particularly, because they have less waste they have to deal with.[10]

7. Given the range of experience that already exists within our EU neighbour states, we question how much additional information can be gained by operating a mere five pilot schemes by 2012 in England. The Minister for Waste told us: "we want to see in some depth just what would be the nature of the schemes… we are quite confident that five is a good enough number to give us a range of different schemes which can then be monitored in depth and from which we can learn sufficient to decide whether we want to propose to Parliament that we roll out nationally such schemes."[11] She also said that five pilots would "cover the possible range of types of scheme. Also, we clearly want to do rural and urban, we clearly want to do different areas of the country, and within five pilots we expect to have sufficient scope."[12] We do not believe that allowing only five of England's waste collection authorities to introduce schemes, covering four different collection methods, in a mixture of rural and urban settings, and across the whole country, will provide significant additional evidence on which to judge whether all authorities should be able to offer such schemes.

8. The Minister for Local Government, John Healey MP, said the success of the continental European experience gave him confidence to believe that a similar scheme or schemes would work in the UK, but that our circumstances were sufficiently different from those of our EU partners to require a design appropriate to ourselves.[13] The Minister for Waste, however, came close to suggesting that the European experience offered enough lessons for any British scheme:

I would just say that we are making a huge debate about these particular schemes when they have been running in many other Member States for a considerable length of time with proven results, so we should not be so afraid of being able to deliver a proper scheme in Britain.[14]

We remain to be convinced that incentive, or charging, schemes, either as currently conceived or as outlined in the Waste Strategy, would work well in England, but we agree with the Minister for Waste that "we should not be so afraid of being able to deliver a proper scheme".

Local authority reaction

9. In our Refuse Collection Report we questioned whether councils would be willing to introduce revenue-neutral incentive schemes, suggesting that set-up costs and ongoing administrative and enforcement costs represented substantial revenue disincentives for local authorities already facing rising waste collection and disposal costs.[15] The Government replied that it intended merely to enable local authorities to introduce schemes and that whether to do so was up to authorities themselves.[16] The Minister for Waste emphasised that "nobody is forcing local authorities to undertake pilots; they have to come forward as volunteers."[17]

10. We still question how many volunteers will be found. When we took evidence last year on refuse collection, almost all the local authorities we heard from supported in principle the idea of charging schemes but were reluctant to charge their own residents. Perhaps the most revealing answer on the point came from Councillor Paul Bettison, Leader of Bracknell Forest, and, as Chair of the LGA's Environment Board, the public face of the LGA's longstanding campaign in favour of charging:

I am in favour of local authorities having that power. If you are asking whether, if we had the power, I would use it in my authority, the answer would have to be that I do not think I would.[18]

11. By mid-December, the Government received inquiries from only 14 authorities following the announcement of its current proposals.[19] The Minister for Waste told us that "that is sufficient for us to be confident that we will have authorities coming forward when they know the details of what is available", but agreed that "the inquiries that these particular authorities have made may not mean that they come forward with a proposal to be one of the pilots."[20] We repeat what we said six months ago: it is hard to see why any council will want to set up a complicated charging scheme that earns it no money and risks widespread public disapproval. The Government's decision to seek only five councils appears to reflect the understandable reluctance of local authorities to do so.

Set-up and administrative costs

12. The principle of revenue-neutrality means that councils that operate schemes will have to return all funds raised to local residents, although money will be redistributed from those who fail to recycle adequately to householders who meet the required recycling standard. The Minister for Local Government confirmed to us that "the local authority will not be able to hold on to any element of what may have been raised through an incentive scheme in order to cover its administrative costs."[21] This means that authorities will have to fund the set-up of schemes and pay ongoing administrative costs. During our inquiry into Refuse Collection, Gary Alderson, Director of Environmental and Planning Services at Mid-Beds District Council, estimated the set-up costs for his council at £500,000 with ongoing administrative costs of £100,000 to £150,000.[22] Councils will be unable to recover such costs directly from schemes, but the Government believes that significant improvements in local recycling will result in sufficient waste disposal cost savings to pay for them in the longer run.[23]

13. Although councils would be required to meet those costs from within their own resources following a full national roll-out of incentive schemes, the Government has committed up to £1.5 million a year for three years to support the five pilot schemes.[24] The Ministers for Waste and for Local Government jointly told us: "the authorities in question will … be free to set their own priorities, to pay for short term set up costs for example."[25] Under the Government's initial proposals, any local authority operating a financial incentive scheme would have carried the costs of setting up, administering and enforcing it. For the five pilot schemes, those costs may be paid out of the £1.5 million a year the Government is providing. As such support is unlikely to be available to councils in the event of any national roll-out, we recommend that reports back to Parliament on the pilots fully reflect the impact those costs would have had on council budgets and services had the five pilot authorities been required to pay them themselves.

14. The Government believes that financial incentive schemes may raise recycling rates sufficiently to save councils around £18 per household per year and that this provides a means by which costs may be recovered.[26] In addition, local authorities should benefit from sending less to landfill as householders recycle more waste. In May, Defra hoped that "this could help them comply with their obligations under the Landfill Allowance Trading Scheme (LATS) and hence avoid penalties."[27] The Government's current proposals suggest all hope has been abandoned of achieving that goal. None of the five pilot schemes will begin until the 2009-10 financial year and they are expected to run for three years and be followed, according to the Minister for Waste, by "a report back to Parliament before a decision is made whether to roll them out more widely."[28] The decision to limit the number of schemes to just five, none starting before April 2009, all running for three years before Parliament is asked to decide on a national roll-out, means that financial incentive schemes will have no discernible effect on local authorities' duty to meet European Union landfill diversion targets before penalties fall due in 2010 and 2013.

The limits to devolution

15. In the Waste Strategy, the Government set out its commitment to local decision making:

The Government believes that giving authorities the power to determine locally how to respond to the waste management challenges they face is an important part of increasing local flexibility as part of the Government's devolutionary agenda.[29]

One element of this "maximum flexibility to decide the best way to encourage sustainable waste behaviour in their local area" was the proposal that authorities should themselves decide how much or how little they should offer as rebate, or take as a charge, in the financial incentive schemes they were to design for themselves.[30] The Government trusted councils to set their own levels because they would have "no incentive to set payments at a higher level than was necessary to encourage behavioural change, because money raised would have to be returned to residents."[31]

16. On this point, too, the Government has now retreated, and Ministers intend to take a power to cap the level of any incentive offered. The Minister for Waste told us: "I honestly do not think that any of us believes that local authorities are going to come forward with foolish proposals but we felt we should put it there just in case there was such a need and perhaps also to give confidence … that this is something that is not going to be a 'stealth tax'."[32] The decision to cap the amounts that local authorities may offer their residents as incentives, or charge them, runs counter to the Government's rhetoric on devolution and local decision making.

Public reaction

17. Opinion polls have suggested that the public supports the idea of separate charging systems for refuse collection with certain conditions attached. In a poll conducted by Defra, 52 per cent of those interviewed said they would favour a system that rewarded them if they recycled everything they could and penalised them if did not. An IPSOS Mori poll found that 64 per cent of people would support their local council operating a system whereby direct charges for refuse collection were coupled with reductions in council tax.[33] The Minister for Waste told us that "most people believe it is fair to charge people who do not do what is expected of them in terms of their waste. If people will not do these simple tasks of separating their waste and recycling, the public do think that they should have a charge imposed upon them."[34]

18. Once again, however, as with councils desiring the power to introduce incentive or charging schemes but being more reluctant to do so in their own areas, we believe there may be a distinction between principle and practice here. In principle, the public supports the idea that those who produce most waste should pay most for its removal. In practice, the comparatively small sums likely to be offered by incentive schemes may prove disappointing, particularly if applied as rebates or reductions on council tax. The then Minister for Waste, Ben Bradshaw MP, told us last year that figures of around £30 were in "the right kind of ballpark" as likely rewards or rebates.[35] The average council tax bill for a band D home was £1,056 in 2006-07.[36]

19. Evidence from other European countries that operate charging systems suggests that amounts around £30 can have an impact on behaviour change, and the wider example of supermarket loyalty cards has also been cited as an example of people responding to fairly small rewards.[37] The Minister for Waste has also pointed out that the pilots will enable the Government "to test what kind of sum would create an incentive", but she added that it "could be that here [in the UK] we would believe that it had to be a higher sum of money in order to create an incentive."[38]

20. The other side of the coin is that revenue-neutral schemes of the sort the Government proposes require rewards for one householder to be funded from charges imposed on another, either directly or via local authority funding supplied by central government grant and council tax. The Minister for Waste confirmed for us that householders who do not recycle to the standard required by any scheme will pay more to have their refuse collected:

That is certainly the point of an incentive scheme … Those who did very well could get rewards and those who failed to meet whatever was deemed to be the norm would then be people who had an additional charge made on them or a specific charge made on them because of their failure to recycle.[39]

Any authority allowed to operate a pilot scheme will be required to put "clear communication strategies … in place to communicate the nature of the system to householders."[40] The Minister did not think the "question of fairness and unfairness needs to come up if the schemes are very properly explained and people at local authority level are able to give this information to people about the intrinsic fairness and the behaviour that is expected within any community."[41] We believe that the Government is over-optimistic about the impact charging will have on householders who find themselves paying more for a service many believe they pay for already through council tax.

21. A question of fairness also arises. Residents living in neighbouring local authority areas may or may not benefit from incentive schemes or pay more for failing to recycle adequately. This will depend on whether or not their council introduces a scheme. The principle of devolution implies that differing areas will have differing policies, and the Government's original proposal could also have resulted in neighbouring councils offering significantly different rewards and charges. But limiting the number of authorities that may participate in schemes potentially exacerbates the feeling that a "postcode lottery" will leave some residents better or worse off than others. If the schemes are as successful as the Government hopes, then those living in the five pilot areas will benefit substantially while those who live in the vast majority of collection authority areas will be unfairly prevented from gaining similar benefits. On the other hand, individuals in the five pilot areas who are required to pay significant additional charges for their failure to meet recycling standards that do not apply in neighbouring areas are likely to feel unfairly singled out.

Council tax

22. Council tax does not pay for refuse collection. The Government estimates that about a quarter of local authority waste collection and disposal costs are in fact accounted for through council tax, with the rest paid out of funds centrally provided to local authorities.[42] None the less, rubbish collection is a highly visible local authority service. Indeed, unlike even education or social care, it is a truly universal service: every home has a dustbin. This leads many householders to see a link between their council tax and the collection of their refuse.

23. In the Waste Strategy proposals for incentives the Government specified that schemes should operate separately from council tax. As late as 16 October, the Government held this line, telling us in its response to our Report on Refuse Collection that: "Under the Government's proposal, schemes would be separate from Council Tax." [43] Less than two weeks later, once the Secretary of State for Environment, Food and Rural Affairs announced his proposals for the Climate Change Bill, the Government, apparently as a result of issues raised by us and which it had just dismissed, changed its mind:

in response to issues raised by the [Communities and Local Government] Committee and a number of other stakeholders during the consultation process, the Government has taken the decision to allow local authorities to link waste incentives with council tax should they wish to do so, subject to the enactment of the Climate Change Bill.[44]

24. Allowing authorities to use council tax to administer the scheme if they wish should ease the difficulties of setting up a scheme, although it may also serve to make new financial incentive schemes less visible than a wholly separate system would be. It will also allow authorities to choose, if they wish, to offer pure rebate schemes, under which residents would receive a rebate in their council tax bill and no one would pay any additional charge. If any council did choose to do that, it would have to fund the rebates from elsewhere in its resources, however, raising the question of whether some other service would be reduced to encourage increased recycling (at least until any savings in collection or landfill costs materialised). We agree with the Minister for Local Government that allowing authorities who wish to administer any recycling incentive schemes through council tax is welcome and sensible.[45]

Taxes, charges, penalties and incentives

25. We argued in our Refuse Collection Report that any householder who pays an additional charge under a "financial incentive" scheme is likely to regard that charge as a tax, a point the Government did not answer in its response.[46] Nor did the Minister for Waste and the Minister for Local Government agree when they appeared before us on whether any charge is, in fact, a new tax. The Minister for Waste first told us: "It is definitively not a tax."[47] A few minutes later, the following exchange occurred:

Joan Ruddock: I have just been told, by the way, that technically these charges are considered by the Treasury as being a form of tax. My understanding is that this is not taxation. For the record, I am being told that I may be mistaken. I do not want to mislead the Committee.

John Healey: I am not sure that is entirely helpful to the Committee.

Joan Ruddock: I know it is not but I do not want to be incorrect.

John Healey: It is the Office of National Statistics that independently makes a judgment about what should be treated as a tax for the purposes of national accounting … Your [Joan Ruddock's] basic argument to Mr Olner that this is not a tax—it has the potential for charging to be an element of the pilot schemes—is absolutely right.[48]

It is a matter of considerable concern that the Minister in charge of the financial incentive pilots appears not to know whether the charges she intends to introduce are or are not a tax.

Conclusions

26. In its proposals in the Climate Change Bill, the Government has:

limited the number of recycling incentive schemes to just five local authority areas

capped the amounts local authorities may offer as incentives or take in charges

and delayed any possibility of allowing England-wide schemes before 2012-13.

This represents a comprehensive retreat. The Government appears to lack the courage of its previous convictions that local authorities are best placed to decide what will work in their own areas and that recycling incentive schemes can contribute towards a genuine, measurable reduction in the volume of waste being sent to landfill.

27. The Government's retreat has resulted in a messy compromise that achieves the worst of both worlds—maximum hostile media coverage for a set of pilot schemes that will have only limited impact before EU fines fall due in 2010 and 2013. The Minister for Waste told us that "if we learn from these pilots that they are not enabling us to move forward in a different way from the progress that is being made from all the other mechanisms that are in place then we could make a decision not to go further."[49] We recommend that the Government withdraw its financial incentive pilot proposals from the Climate Change Bill and reconsider devolving the power to introduce schemes to local authorities themselves. They, both in our view and according to the Government's own rhetoric, are best placed to judge how refuse should be collected and whether local residents should be asked to gain incentives by increasing their recycling or to pay additional charges if they do not.

1 Department for Environment, Food and Rural Affairs, Taking Forward the UK Climate Change Bill: The Government Response to Pre-Legislative Scrutiny and Public Consultation, October 2007, Cm 7225, p. 34 Back

2 HC Deb, 15 November 2007, col. 72WS Back

3 Department for Environment, Food and Rural Affairs, Consultation on the Incentives for Recycling by Households, May 2007, p. 15 Back

4 Department for Environment, Food and Rural Affairs, Consultation on the Incentives for Recycling by Households, May 2007, p. 7 Back

5 Sir Michael Lyons, Lyons Inquiry into Local Government: Final Report, March 2007, paras. 4.223 to 4.235 Back

6 Q 20 Back

7 Department for Environment, Food and Rural Affairs, Summary of responses to the consultation on the 'Incentives for Recycling by Households', October 2007, para 17 Back

8 Communities and Local Government Committee, Refuse Collection, Fifth Report of Session 2006-07, HC 536-I, para 93 Back

9 Department for Environment, Food and Rural Affairs, Consultation on the Incentives for Recycling by Households, May 2007, p. 13 Back

10 Q 62 Back

11 Q 23 Back