Waste Strategy for England 2007 - Environment, Food and Rural Affairs Committee Contents


Memorandum submitted by the Audit Commission (Waste 19)

  The Audit Commission is an independent body responsible for ensuring that public money is spent economically, efficiently and effectively, to achieve high-quality local services for the public. Our remit covers around 11,000 bodies in England, which between them spend more than £180 billion of public money each year. Our work covers local government, health, housing, community safety and fire and rescue services.

As an independent watchdog, we provide important information on the quality of public services. As a driving force for improvement in those services, we provide practical recommendations and spread best practice. As an independent auditor, we ensure that public services are good value for money and that public money is properly spent.

SUMMARY

  1.  The Audit Commission welcomes the Committee's consideration of the Waste Strategy for England 2007 and is pleased to submit evidence to this inquiry.

2.  This response primarily draws on emerging findings from the Commission's ongoing research. There are limits on our ability to draw firm conclusions from the evidence at this stage.

  3.  The initial evidence shows that:

    —  Local authorities are making progress in procuring waste management infrastructure, but some local authorities and private sector contractors have expressed concerns.

    —  Regulatory stability, and early information about any changes in regulation, is valuable in allowing local authorities to plan and procure for the long term.

    —  As waste management arrangements for household waste have become more complex, the need for effective coordination of collection and disposal arrangements has increased. However there are barriers to effective joint working, including some deriving from the policy framework.

    —  There are strong arguments in favour of the government's intention to consult on further restrictions on sending biodegradable wastes and recyclable materials to landfill.

    —  A substantial strand of local authority and local public opinion calls for more action by manufacturers and retailers on packaging in order to reduce waste.

DETAILED RESPONSE

Introduction—the Commission's role in relation to waste

  4.  The Commission audits and inspects a wide range of public sector organisations, including all waste collection authorities (WCAs) and waste disposal authorities (WDAs). The Commission's aim is to be a driving force for improvement in public services.

5.  Subject to final parliamentary approval of the Local Government and Public Involvement in Health Bill, from April 2009 the performance framework for local public services will change, with a new area based, risk focused and forward looking assessment replacing the current Comprehensive Performance Assessment. This new approach, called the Comprehensive Area Assessment (CAA), is still being developed, but it is anticipated that one of the components of CAA, the use of resources assessment, will have an increased focus on sustainability in local areas. CAA will also assess the prospects of improving the quality of life in local areas, including the area's sustainability.

6.  We are currently undertaking a national value for money study into local authority waste management, focusing particularly on the diversion of waste from landfill. We have carried out fieldwork at 12 sites, covering 14 WDAs and 16 of the associated WCAs. This response draws on emerging findings from the first stage of the research, where these are relevant to the topics highlighted by the Committee. The response also draws on our experience of the audit and inspection of waste authorities. Further work and analysis will be undertaken as part of the waste management study, including an analysis of municipal waste management strategies and a survey of local authority landfill diversion plans. We cannot make firm judgements until this work has been completed, but we would be happy to brief the Committee further at a later stage.

  7.  This response concentrates on the role of local authorities in relation to waste, including their relationship with other organisations.

The Waste Strategy

  8.  We support the Waste Strategy's aim of encouraging further movement up the waste hierarchy and we welcome the statement that waste is a shared responsibility.

9.  Working with their local populations, local authorities have made significant progress in recent years with respect to recycling and composting performance (from 7 per cent of municipal waste in 1996-97 to 27 per cent of municipal waste in 2005-06) (Ref 1). Key actions include introducing door step collections of recyclable materials, often with support from DEFRA, and making improvements in the facilities at household waste recycling centres. The majority of collection authorities and disposal authorities we have visited are also planning to develop their waste minimisation, reduction or re-use activity further, for example through school-based waste education and awareness programmes.

  10.  Our work in a range of local authorities suggests that most WDAs, including all of our fieldwork sites, are also taking steps towards landfill reduction through the procurement of residual waste treatment and disposal infrastructure (see the section on this topic below).

Waste minimisation and packaging

  11.  Many local authorities are seeking to expand their waste minimisation and education programmes as part of their strategy for reducing waste to landfill. However, the purchasing choices of local people are made in a context set by the policies of large-scale producers and retailers, often operating at a national level. Officers and elected members in most of the authorities we visited expressed the opinion that more should be done by central government to encourage waste reduction by manufacturers and retailers, particularly in relation to packaging. They claim the support of local people on this point, based on, for example, unprompted responses to municipal waste management strategy consultations[22].

12.  We welcome the work within the voluntary Courtauld Commitment to explore biodegradable packaging and particularly to improve the labelling of packaging as to whether or not its materials can be recycled or composted. This should help reduce the quantity of packaging in residual municipal waste. However, to be useful rather than confusing for members of the public, labelling should take into account the fact that the materials accepted for recycling and composting vary across authorities.

The proposals for financial incentives to increase household waste prevention and recycling

  13.  The Commission has no objection to the general principle of local authorities being able to use financial incentives to influence how citizens dispose of waste, subject to certain conditions. Any scheme should:

    —  fit within a local waste strategy that results in the best overall management of waste and value for money for an area;

    —  avoid creating perverse incentives for the councils involved; and

    —  be fair and equitable across communities.

  14.  Further detail is given in the Commission's response to the DEFRA consultation on the financial incentives proposals (see the Appendix to this memorandum).

Infrastructure for municipal waste treatment and disposal

  15.  Recycling targets and the Landfill Allowance Trading Scheme (LATS) have stimulated councils to divert waste from landfill and move up the waste hierarchy by commissioning new waste management infrastructure. However, the scale and speed of infrastructure delivery, and its likely contribution to meeting the national targets for diverting biodegradable municipal waste from landfill, is uncertain.

16.  The Commission is conducting research (in cooperation with DEFRA and the Regional Centres of Excellence) to understand current and planned infrastructure capacity across England, set against local authorities' landfill diversion plans up to 2020. This survey will also collect the projected costs of changing collection and disposal methods, as authorities move up the waste hierarchy. This research should provide a clear picture of progress in diversion of waste, the associated costs and any potential risks at both a national and local level. The results of this work will be published as part of our waste management study in spring 2008, although we will make the information available to DEFRA well in advance of that for use in their national waste modelling.

  17.  Emerging findings from our fieldwork in relation to the procurement of new infrastructure are positive:

    —  Many local authorities felt that central government has improved its support and guidance to authorities engaged in waste procurement, through the creation of the Waste Infrastructure Delivery Programme (WIDP).

    —  Local authorities and their partners are aware of the planning risks for procurement timescales and have been seeking to mitigate these.

    —  There is some evidence of waste disposal capacity being built by the private sector without requiring contracts to be in place with users in advance.

    —  The Office of Fair Trading expressed concern in 2006 about the implications of local authority dependency on a limited number of suppliers (Ref 3). However the local authority waste disposal market now appears to be seeing a wider range of competitors. This includes UK firms from other sectors of the economy and new technology providers from abroad, often operating as sub-contractors or as part of consortia. Smaller UK waste management companies provided a real challenge to the larger waste management operators in two recent procurements in our fieldwork areas.

    —  Authorities engaged in negotiating long term waste disposal contracts have devoted significant resources to detailed modelling in order to understand and manage the risks involved in a large number of future scenarios.

  18.  However, during fieldwork private sector waste contractors expressed concern about the demands placed on bidders for local authority waste procurements (which are often through the Private Finance Initiative), including the process of competitive dialogue[23]. These demands limit their capacity to bid for contracts, constraining market capacity and competition.

  19.  Private sector contractors also observed that the attractiveness of local authorities as customers varies. In deciding where to deploy their bidding capacity, waste companies consider factors such as evidence of political support for the procurement, a professional client side team and effective deployment of external consultants in the process. Potential bidders wish to avoid investing time and money in procurements that are unduly lengthy, involve substantially changing requirements or fall through due to lack of political support. There is therefore a risk that some councils will have difficulty getting good value from a competitive bidding process.

  20.  Most recent waste disposal contracts are for long periods (25 years or more). Some local authorities, while recognising that long contract durations may be necessary where major capital investment is involved, expressed concerns about the appropriateness of long contracts given the uncertainties around the future size and composition of the waste stream and the effectiveness or future acceptability of disposal technologies.

  21.  Building flexibility into long term contracts can be difficult and expensive even if done from the outset. Moreover, the experience of some authorities engaged in negotiating variations to existing long term disposal contracts indicates that such negotiations can also be lengthy and difficult, and the variations may be expensive. Those authorities committed to long term contracts placed great value on consistency in the political and regulatory environment.

  22.  For some authorities these concerns about uncertainty were heightened by the scale of their potential contracts, which were large even in relation to other local authority capital expenditure.

New technologies

  23.  Our fieldwork suggests that private finance for new technologies is difficult to secure before a full scale plant processing UK municipal waste is running successfully. Mechanical-biological treatment and anaerobic digestion facilities for municipal waste have opened in the last few years. Their proven track record has improved the "bankability"[24] of projects depending on these processes and encouraged the development of markets for their products, although some issues remain (see next section).

24.  Advanced thermal treatments for municipal waste remain less familiar within the UK. However gasification, pyrolysis and mechanical heat treatment plants part-funded by DEFRA's New Technologies Demonstrator Programme will start operating within the next two years. We would expect these technologies to become more bankable, dependent on the outcome of these projects. However the development of waste treatment technologies will continue, and we would encourage the government to monitor any need for further public development funding as newer technologies offering significant potential benefits arise.

The classification of outputs from waste treatment

  25.  Local authorities need as much information as possible about the regulations that will govern outputs from waste treatment processes before making investment decisions. We therefore welcome the Environment Agency's work on a protocol for anaerobic digestate from segregated waste and on a number of other protocols for other major waste streams.

26.  As one means of diverting biodegradable waste from landfill, many councils have chosen to procure facilities for various forms of biological treatment of mixed waste. The classification of outputs from these treatments is important because it determines how these outputs can be used or disposed of. This will influence the LATS benefits and overall costs of the treatment processes. In our fieldwork we found that some authorities who made plans in the expectation of the favourable regulation of the outputs of mixed waste processes have been obliged to change their plans and projections when it became apparent that the regulation would be less favourable than anticipated. We would encourage the Environment Agency to be as clear as it can in advance about the likely regulatory treatment of outputs from mixed waste treatment processes.

Regulation of landfilling

  27.  We welcome the government's intention, subject to continued analysis, to consult on further restrictions on sending biodegradable wastes and recyclable materials to landfill. As the Waste Strategy notes, a variety of bans have been used successfully in other EU member states. A projected shortage of accessible landfill was a powerful stimulus for three of our fieldwork authorities, which are among the authorities that have been engaged for longest in moving up the waste hierarchy.

28.  The government has emphasised the importance of greater certainty and stability in policy frameworks, for effective long-term planning. Annual LATS allocations were announced for the years from 2005-06 through to 2019-20. Authorities told us that this scheme has been successful in moving waste management up the agenda of local authorities. Early announcement of controls on landfilling waste beyond 2020 would promote sustainable waste management across all waste generating sectors. This would generate future demand for the treatment of waste by the private sector and the public sector, which could further stimulate the market for waste treatment infrastructure. Any such controls would give long term certainty to local authorities in planning procurements beyond the lifetime of LATS and also would allow councils greater freedom to be involved in the collection of commercial waste.

RELATIONSHIPS BETWEEN AUTHORITIES

Co-ordination between collection and disposal authorities

  29.  Coordinating with waste collection authorities is becoming more important as disposal authorities, including joint waste disposal authorities (JWDAs), seek to divert sufficient biodegradable waste from landfill to meet their landfill allowances. Formal (sometimes legally binding) agreements are becoming increasingly common as waste disposal authorities sign significant contracts for waste treatment facilities, with guarantees concerning the provision of waste from collection authorities. Deciding on the most effective waste management arrangements involves complex modelling of both collection and disposal services, for example, to maximise materials recovery.

30.  Each authority has to achieve best value individually for a waste management service that is increasingly becoming a joint effort between collection and disposal. A common dilemma is that for disposal authorities to achieve their landfill allowances, avoid substantial penalty charges and obtain best value in their waste treatment contracts, they may need collection authorities to invest in new and more expensive collection arrangements. But collection authorities, with restricted budgets and no financial penalties like those imposed on disposal authorities under LATS, have little incentive to invest. The only significant pressure on them is the risk of missing a statutory recycling target, which does not attract a financial penalty. We visited two JWDAs (of the six that exist) and reaching agreement appears to be more straightforward in such areas, where collection authorities ultimately bear the cost of disposal through a levy.

31.  Some councils are proactive in local business networks, promoting waste awareness and waste reduction with small and medium-sized businesses and making links where possible with other companies that reuse or recycle waste. Expanded council commercial waste collection services can also be useful to local small businesses, and such greater engagement may be desirable if it either encourages more recycling or enables economies of scale across waste streams. However, extending council collections of commercial waste may be an issue for disposal authorities if it increases the overall biodegradable waste they must deal with under LATS. We have seen some disposal authorities actively encouraging collection authorities to introduce trade waste recycling schemes, to achieve an optimal solution for both parties. We are not at present persuaded that this will always resolve the issue given the possible difficulties and expense of introducing new trade waste recycling schemes.

  32.  The proposed creation of nine new unitary authorities would bring collection and disposal together in a number of areas. Also, subject to final parliamentary approval, the power contained in the Local Government and Public Involvement in Health Bill will allow authorities to form Joint Waste Authorities voluntarily. But at present, if authorities in two tier areas cannot reach agreement on the way forward then the last resort available to disposal authorities is the use of powers of direction. However, disposal authorities are reluctant to use these powers (and none of our fieldwork authorities had used them) because this would have a disruptive effect on their relationship with the collection authorities, and may not be appropriate in the context of developing new working arrangements intended to be of mutual benefit.

  33.  There may be scope for central government to review how, in practice, local LATS obligations (which bear on disposal authorities) and statutory recycling targets (which bear on all waste authorities) fit together in the light of the chosen strategy for an area. Tensions between authorities could be reduced by, for example, creating better incentives for collection authorities to emphasise waste minimisation and removing biodegradable material from the waste stream, as part of a more integrated system of performance assessment.

  34.  Our fieldwork found examples of waste partnerships that had generated and maintained a commitment to significant, long term changes, despite political differences. However, developing sufficiently strong partnerships between authorities requires a substantial investment of both officer and member time over a significant period. We found examples of delays and difficulties, even within the most successful partnerships. This is not surprising given our previous findings about the challenges of partnership working (Ref 5).

Joint procurement

  35.  Another potential driver for effective partnership working between authorities is the need to achieve economies of scale. This is heightened by the tension between rising collection and disposal costs, and the need to demonstrate best value and the pressure for efficiencies, most recently the requirements of the Comprehensive Spending Review 2007. Fieldwork for the waste management study suggests that there may be potential for greater economies of scale through more joint procurement of disposal facilities and (separately) more joint procurement of collection services, although we are not able to quantify this potential at the current stage in the research. Moreover, the potential benefits need to be balanced against the risk of weakening competition in the medium term if the amalgamation of contracts in a geographical area gives significant advantages to an incumbent supplier. The optimal lengths of disposal and collection contracts are likely to be different, so joint contracts for collection and disposal would require particularly compelling benefits to justify them.

36.  Barriers to more joint procurement, particularly for collection, often appear to relate to the political desire to retain local control of waste services, rather than strictly operational issues. Arguably, local control enables waste management arrangements to meet local wishes, based on knowledge of local circumstances. But this needs to be balanced against the potential financial benefits of shared services and community preferences. Several fieldwork authorities argued that in fact many users would prefer more unified rather than locally tailored services (for example having the same colour boxes and bins, and the same materials collected for recycling, across authority boundaries).

  37.  With respect to disposal, some authorities are procuring joint residual waste facilities in order to make efficiencies, although we have also encountered examples where plans for partnership working have fallen through, for a variety of reasons, and others where joint procurement has been deemed to be inappropriate or impractical.

Future work

  38.  We hope to publish our report on local authority waste management in May 2008. The report will identify good practice, and provide information to local authorities so that they are better equipped to make sound, evidence-based decisions. We would be happy to discuss the emerging findings of the waste management study in more detail with the Committee or its officials if that would be helpful.

REFERENCES

Reference 1

  DEFRA municipal waste management statistics. Available at:

http://www.defra.gov.uk/environment/statistics/wastats/index.htm.

Reference 2

P Downing and J Ballantyne, Tipping Point or Turning Point? Social Marketing and Climate Change, Ipsos MORI Social Research Institute, 2007. Available at:

http://www.ipsos-mori.com/publications/srireports/climatechange.shtml.

Reference 3

Office of Fair Trading, More Competition, Less Waste: Public procurement and competition in the municipal waste management sector, Office of Fair Trading, 2006. Available at:

http://www.oft.gov.uk/advice_and_resources/publications/reports/competition-policy/oft841.

Reference 4

Confederation of British Industry, Building on Success: the way forward for PFI, Confederation of British Industry, 2007. Available at: http://www.cbi.org.uk/pdf/healthreport0607.pdf

Reference 5

Audit Commission, Governing Partnerships: Bridging the Accountability Gap, Audit Commission, 2005. Available at: http://www.audit-commission.gov.uk/nationalstudies/publishedstudies-crosscutting.asp.

Audit Commission

October 2007

Appendix

The Audit Commission's consultation response on household incentives for recycling, August 2007

SUMMARY

  The Audit Commission has no objection to the general principle of local authorities being able to use the mechanism of charging as a means to influence how citizens dispose of waste.

However, based on the evidence of fieldwork in connection with our audit, inspection and studies functions, we also sound a note of caution. Any scheme of charging should fit within a waste strategy that results in the best overall management of waste and value for money for an area and shouldn't create perverse incentives/disincentives for the councils involved. Similarly any scheme should be fair and equitable across communities.

DETAILED RESPONSE

  We have answered the questions set out in the consultation document where we have something pertinent to say.

QUESTION 1:

Do you agree that local authorities should have the power to introduce financial incentives for promoting recycling and reducing household waste? Why?

  Response—We have no objection to the principle. We have observed that well designed and fairly implemented charging schemes can be used to successfully influence behaviour.

QUESTION 2:

 (a)   Do you agree that a power to introduce financial incentives would help local authorities to meet their recycling targets and their obligations under the Landfill Allowances Trading Scheme?

  Response—We have already noted that charging mechanisms may influence behaviour. However, it doesn't necessarily follow that such behaviour change means that recycling targets or LATS obligations are met. For example; a particular charging scheme might encourage much greater volumes of biodegradable materials such as green waste to be composted by householders at home and thus never enter the municipal waste stream. It is feasible in this example that while the objective of the LATS might be met (that is, less biodegradable landfill) the recycling target might be missed (because proportionately there is less material to be reclaimed from the waste stream).

In this case, while this would be a good outcome, the system of applying statutory recycling targets would need to change. It would be perverse if the risk of missing recycling targets was a constraint on introducing better waste management behaviours. The general lesson is that a scheme of charging would have to form part of a whole system approach to the management of waste designed to give the best outcomes, not just to meet existing statutory targets.

 (b)   Are there other barriers that Government could address to help authorities boost recycling and meet their obligations under the Landfill Allowances Trading Scheme?

Response—There can be barriers in areas where collection and disposal functions are separate because the pressures of the recycling targets and LATS obligations do not bear on collection and disposal authorities equally.

The pressure on the collection authority is the risk of missing its statutory recycling target, which doesn't carry any real sanction and no financial penalty. Whereas, missing the LATS obligation can be very expensive for the disposal authority.

  The disposal authorities we have visited were trying to resolve these issues through working with the districts. If they did not reach agreement they would only have their powers of direction, which they see as an instrument of last resort.

  There may be scope to review how, in practice, local LATS obligations and recycling targets fit together in the light of the chosen waste strategy for the area. There is a need to minimise the risk of perverse outcomes perhaps by creating better incentives for collection authorities both to minimise the amount of municipal waste arising and to put a greater priority on removing biodegradable material from the waste stream (for LATS), as part of a more integrated system of performance assessment.

QUESTION 4:

 (c)   Do you agree that local authorities should be free to determine the level of charges under a financial incentive scheme?

  Response—Yes. We would argue that councils would need the greatest flexibility to implement a scheme that achieves the desired result of reducing the amount of biodegradable waste sent to landfill. At the same time it should be applied fairly and not increase activities such as fly-tipping.

QUESTION 6:

The Government's view is that it would be essential for local authorities to have good recycling services, fly-tipping prevention and enforcement strategies and measures to help disadvantaged groups in place before introducing financial incentive schemes. Good communication with local communities before the implementation of any scheme will also be critical.

 (a)   If the Government were to allow financial incentives, what requirement should the Government place on local authorities as regards:

 (i)   Existing recycling services—do you agree with the proposal to require authorities to offer a recycling/composting service for at least five waste streams to any household covered by a financial incentives scheme?

  Response—It is vital that good recycling facilities are available to local residents so that the charging scheme is an incentive to take part. However, requiring councils to offer a specific (five stream) system across the country may impact on their ability to deliver value for money.

Placing such a requirement on councils alone may discourage useful voluntary sector participation in, bottle, clothing or shoe banks and at civic amenity sites. Similarly, offering advice on reducing waste, and alternatives which reduce the amount of material entering the municipal waste stream in the first place (such as home composting, wormeries, etc) may offer better value for money rather than stipulating a minimum number of different types of waste that must be collected for recycling.

 (iii)   disadvantaged groups?

Response—Charging needs to be carefully considered in the light of the ability of councils to offer recycling facilities and the ability of residents to participate. It should be recognised that a number of local factors could apply that would effectively exclude some groups from possible financial benefit through reducing and recycling their waste.

Some particular examples include:

    —  Those without room to store waste prior to collection. This applies to kerb-side recycling (for example, no room to store several bins for "routine" rubbish) and also to large occasional items such as furniture.

    —  Housing areas with communal bin stores—which would effectively be excluded from any personal incentive scheme.

    —  Transient or newly arrived populations—most of the examples cited seem to require householders to live at a location for a year (examples are given over a year). This will impact on students and migrant workers in particular.

 (b)   How far should these issues be determined by the Government, and how far at local level?

  Response—The arrangements should be determined at local level within broad principles.

QUESTION 7:

 (a)   Do you agree that waste disposal authorities should have the power to implement financial incentive schemes at civic amenity sites?

  Response—The inclusion of civic amenity sites in a charging scheme is vital to ensure that waste is not simply re-directed to them instead of being put out for collection. There are several possible difficulties.

    —  A lesser or no charge at civic amenity sites might encourage additional travel by residents (and a bigger carbon footprint) taking their waste to sites when it would be more efficiently collected at the kerbside. —  Conversely, people without access to a car or living far away from a civic amenity site would be disadvantaged.

    —  The issue would be further complicated at the boundaries between different charging schemes, for example by people using a site in other authority areas because it is nearer or cheaper.

 (b)   If so, how could financial incentives be administered at civic amenity sites?

  Response—Others will be better placed to consider this, but it should accommodate all the factors required for collection (not encourage fly-tipping, be fair and equitable to all and encourage minimisation and recycling). How it would be administered would depend on how the basic kerbside collection charging scheme is set up, which would be a matter for councils to determine.

QUESTION 8:

Are there other issues that Government needs to consider concerning financial incentive schemes?

  Response—Councils will need to consider the value for money of the potential gains from introducing such schemes against the likely impact and the costs of setting up and administering the scheme over its whole life. In particular administrative costs are likely to be affected by the degree of central control and reporting that is required. In designing any scheme government should carefully consider the likely burdens of any new approval or reporting mechanisms.

As with all important new measures, the introduction of local waste charging schemes would need to be sensitively handled in terms of local consultation and national messages. At a national level there would need to be clear leadership on the key issues that can be reflected at local level.

Audit Commission

October 2007






22   There is also some support from national survey evidence. When asked "Which of the following statements comes closest to your views of how retailers are addressing social and environmental issues?", 5 per cent of respondents agreed that "Retailers are trying to do as much as they can, as fast as they can", while 38 per cent agreed that "Retailers are making some positive steps, but still have some way to go", 41 per cent agreed that "Retailers are only making slight changes and still have a long way to go" and 11 per cent felt that "Retailers are not really making any changes and need to do much more" (Ref 2). Back

23   The CBI has expressed general concerns about PFI procurement delays and expense (Ref 4). Back

24   That is, acceptability to the funders of privately financed projects. Back


 
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