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Lord Glentoran: I have one practical point. I apologise for referring to another debate if noble Lords have not read it, but in a recent debate, when only four noble Lords were in the House—the noble Lord, myself and the noble Lords, Lord Lucas and Lord Greaves—the point was made by the noble Lord, Lord Lucas, that some local authorities were recycling 40 per cent of municipal waste and some only 2 per cent.

I am worried about the trading part of the Bill. I have been coming from the same place all the time: the financial input of the capital requirements and the money that needs to go in—the 1.5 billion a year for ten years, that the industry tells us it needs. It appears that there will be an encouragement on local authorities that are equipped to recycle only 2 per cent of their municipal waste to spend all their money buying from those that now recycle 40 per cent, that have presumably spent a great deal of capital and that have sophisticated equipment to allow them to recycle that percentage.

In some ways, as the clause is currently drafted, I wonder whether it is demotivating to what one might call the "poorer" authorities—if, indeed, they are the poorer authorities; the noble Lord, Lord Lucas, made the point that they might be. Those authorities may not be motivated to invest in their own capital plant but will simply spend money and buy the facilities from others. I am not sure whether in the medium—let alone the long—term that is where we want to go.

Lord Hanningfield: In supporting my noble friend, I do not like to give the example of Essex again. However, Essex has 12 district councils which are collection authorities, and we have two unitary authorities—one being Southend, which has no disposal facilities at all as it is totally built up. We tried to create a consortium between the two unitary authorities, the 12 district councils and the one county council.

In supporting my noble friend, I should say that district councils have totally different rates of recycling. Some are recycling 40 per cent and others are recycling hardly anything. That is why I said at the beginning that it will be almost impossible to operate the Bill. I am sure that we shall discuss this matter a great deal in Committee. It will be difficult to penalise disposal authorities when the fault lies with the collection authorities which cannot meet the targets. We shall return to that issue.

We have spent two years trying to get the authorities to agree on the matter within a consortium. The word "incineration" is already engraved on my heart. We have had riots and disturbances as no one in Essex wants incineration. In fact, I have given an undertaking that there will be no incineration without a referendum in our county. Therefore, we are considering different and very expensive methods of disposal, and we hope that modern technology will

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catch up a little. In many parts of the country, incineration is not acceptable. We need to find different ways to deal with waste and we are trying to speed up technology in order to find methods of doing so.

I repeat what I said at the beginning: this is a case of putting the cart before the horse. We need to encourage people to minimise waste and we need to encourage district councils, which are the collection authorities, in the eastern region. Eighty-eight per cent of councils in that region are two-tier councils and that is why the Bill is almost impossible to operate in England. It will be easy to do so in Wales, Scotland and Northern Ireland because the councils there are all unitary. But, in England where 70 per cent or so are two-tier councils and in the eastern region 88 per cent are two-tier, unless there is total co-operation between district and county councils, the Bill will not work at all. Therefore, I add to and endorse what my noble friend Lord Dixon-Smith seeks to achieve in the amendment. We need to examine fundamentally the whole reason behind the Bill and how it will operate.

4.45 p.m.

Lord Dixon-Smith: This has been an interesting discussion because it has gone to the heart of the problems presented by the Bill. I am grateful to those who have supported, in various ways, the initial remarks that I made.

I am not particularly encouraged by what the Minister said. I understand his point that the Bill sets out a default position and I understand his difficulty in setting it out in any other way than this. But, in view of the realities of the problems that we face, it would almost be better if it were not there.

In returning to the subject of financing and the point raised by the noble Lord, Lord Stoddart, it would be interesting to know whether there are "identified ad lib funds" to make all this work. At the very least, there will need to be some expensive installations. I began to describe them at Second Reading and I completely understand the problem that everyone has with incineration. I, myself, do not like incineration and I do not believe that anyone should build incinerators any more. They simply convert one form of pollution into another form of pollution, and that is not what the business should be about.

My favourite solution—an expensive one—is anaerobic digestion. I was not serious when I mentioned turning soiled nappies into wallpaper but it is happening in Belgium and the United States with the huge subsidy that I mentioned. There are all kinds of ways of dealing with the problem, but I prefer anaerobic fermentation because biodegradable waste can be turned into ethanol. In that process there is an irreducible minimum of waste that has to be disposed of, but the volume can be greatly reduced, producing something very useful which is a greenfill. We do not have to worry too much about incinerators but I cannot accept that an anaerobic digestion plant will be any less controversial, wherever one decides to put it. That is one problem.

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I turn to the market being intended to even matters out so that the good performers have something to sell. I refer to good and poor performers because, when one considers rate of progress, some will be more successful than others. Perhaps one should consider how that can be carried out if an authority's base point is based on what it collects or what it disposes of at the moment. My noble friend Lord Hanningfield, when discussing Essex, did not mention London; he was discussing the Essex issue only. For a long time Essex has been a major disposal facility for London.

That is a slight red herring to what we are talking about but it is a potent issue. The noble Lord mentioned waste disposal authorities not just in London but in other metropolitan areas. They are not waste disposal authorities at all; they are waste collection authorities because they have no facilities to dispose of waste within their boundaries. If we are realistic about this point, in the Bill there is an appalling problem with definitions.

I return to the awful difficulty about the administrative and planning problems that will impose a delay. The market will not be able to even that out unless—perhaps the Minister can do this although it will cause a furious row in local authorities—he allocates waste to each authority on a notional volume or quantum of waste—perhaps by weight—per capita so that every authority starts with the same per capita allowance. One will not be able to make any provision either to help authorities that are "good performers" vis-a-vis those that are "poorer performers", nor will there be anything to trade initially.

The other way is to give every authority an allowance that is too big to start with but that would defeat the whole point of the exercise. One has to assume that the sum of the allocations that are made in the first distribution will equal the volume of waste presently being disposed of to landfill in that way.

I hope that the Minister will tell me that that assumption is correct. If it is not correct perhaps the problems that I foresee will be easier to deal with. If every authority in a trading scheme starts where it is now on day one, no authority will have anything to trade until three, four or five years down the scheme, by which time we shall be running up to the second date. It will be a difficult exercise. I can see a number of authorities getting into difficulties, having to pay large sums of money to the Treasury, or having large sums of money extracted from them by the Treasury. The interesting point about that is that with something like 84 per cent of all funding coming from central government to local government, is the Treasury going to pay its tranche? I assume not. The council tax payers are probably going to have to pay it.

If it is simply the council tax payers paying it, it will be very difficult and certainly in the initial year, it could impose completely unreasonable burdens. While I can see that the market system might have some validity by about 2015, for the first five or eight years it is not going to be any help at all. I come back to the fact that the default position is a straight line graph. If we are

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not going to use that and we simply have the three dates, what is going to happen? If the straight line is in effect impractical, which I suggest very strongly it is, I do not know why we have Clause 3 in the Bill.

Lord Whitty: I am unsure whether the noble Lord, Lord Dixon-Smith, is suggesting that we should have no default position in the Bill. The whole tenor of the rest of his remarks and those of some of his colleagues has been that we need to be able to plan this and to have a clear strategy for developing it. The allocations will naturally be based on the actual waste. The aim is to minimise or reduce the amount that is landfilled. The landfill dimension can then be traded.

Although it is true that the amount of trading will grow and be cumulative—so there will be less trading flexibility at the beginning of the scheme than at the end of it—it is also true that the steps at the beginning will be easier than those at the end. Therefore, the flexibility required further down the line will increasingly be provided by the trading market that we are creating. Given that we have to meet the targets, all that this clause is doing—and we have spent quite some time on it partly because of the attention it attracts through its use of algebra—is to show that we need to ensure that we have a pattern to which people can work.

Clearly, we need some flexibility of work on the part of the allocation authorities as well as the individual authorities in order to meet those targets. However, we have to ensure that there is a pattern against which they are judging themselves and the Government are judging them. As the landfill trading scheme increasingly provides flexibility into the system, it will become easier for us to say that the default line is the appropriate line. It may be that at the earlier stages, different judgments will have to be made but we are not yet at that stage.

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