Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2010

Wednesday 17th November 2010 Grand Committee

Considered in Grand Committee

16:33

Moved by

[Lord Henley]

That the Grand Committee do report to the House that is has considered the Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2010.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley)]

My Lords, these regulations set new recovery and recycling targets for packaging waste for 2011 and 2012. They will also improve transparency in the way in which the packaging recycling system is funded and will make a number of technical changes to improve the clarity of the regulations and reduce costs to business.

First, it should be remembered that tackling waste is not just the responsibility of government; it is a responsibility for all of us, including businesses, private individuals and local authorities. It is for this reason that the Government are undertaking a review to look at all aspects of waste policy and delivery in England. The review’s main aim will be to ensure that together we are taking the right steps towards creating a zero-waste economy in which resources are fully valued and nothing of value gets thrown away.

Last year, nearly 11 million tonnes of packaging were placed on the United Kingdom market with the products that it protects. About half this packaging is from household goods, and after use it accounts for about 20 per cent of household waste. The rest of the packaging is used and disposed of by businesses, and it accounts for about 10 per cent of commercial and industrial waste.

The EU directive on packaging and packaging waste, which has been in place since 1994, requires member states to recover every year a minimum of 60 per cent of all packaging waste, of which 55 per cent must be recycled. Through the producer responsibility system that we have put in place in the UK and which is set out in these regulations, the UK achieved those targets in 2008 and 2009 and is on course to do so again in 2010. However, the current regulations set recycling targets for packaging producers in the UK only until the end of 2010. We therefore need to put measures in place to ensure that the UK continues to meet the EU packaging recycling targets in future years, and so ensure that packaging waste continues to be recycled. If we do not, we can expect rather costly infraction proceedings. At the same time, we need to ensure that these targets are achieved at the lowest possible cost to businesses to support them in this challenging economic climate.

The Government will set out our long-term approach to packaging as part of the waste review, to which I referred, which is due to be published next spring. In the mean time, the Government propose in these regulations to set packaging recycling targets for 2011 and 2012 only, and at a level that will ensure the delivery of the EU targets in the packaging directive but no more. Targets for 2013 and beyond will then be considered in light of findings of the review.

The regulations also include provisions to improve the transparency of the funding associated with packaging waste recovery notes, PRNs, and packaging waste export recovery notes, PERNs—the evidence notes issued by reprocessors and exporters to show that recovery and recycling has taken place. Reprocessors and exporters will now be required to report on how they have spent the PRN revenue against new more defined categories. The new categories, developed with the industry, will provide a more accurate picture of how this funding is used to benefit the packaging recycling system as a whole.

Finally, the regulations contain a number of minor technical changes. Most of them aim to clarify definitions, key dates for data returns and payment deadlines, and update references to legislation revised since 2007. Two changes are deregulatory. First, the amendment removes the requirement for reprocessors and exporters to have an independent audit, which can cost up to £10,000 for a large company. Secondly, it will allow a certain category of smaller businesses to use a simpler method to calculate their legal obligation, which will save time and effort. Benefits from these mean that as a whole, the proposed package of changes will reduce the net administrative burden placed on UK businesses by between £285,000 and £371,000 annually.

In conclusion, I believe that the amendments that the Government are proposing to the packaging regulations will enable the UK to continue to meet its EU obligations, while minimising costs to UK businesses; will make the flow of producer funding more transparent for producers and local authorities; and will resolve a number of technical issues, which will overall reduce costs to business. I commend the regulations to the Committee.

16:39

Sitting suspended for a Division in the House.

16:50

[Baroness Quin]

My Lords, again, I begin by thanking the Minister for his explanation of the regulations and for bringing them forward today. They are in many ways a continuation of an existing policy and approach, and derive from EU obligations. As the Minister explained, the targets needed to be updated for the immediate future. In responding for the Opposition, I simply raise a few questions that are largely stimulated by the Explanatory Memorandum. We know that consultation has taken place on the regulations, and I ask the Minister about the level of interest in the consultation and the overall responses to it. Is he happy about how extensive the consultation was and whether those who will be affected by the regulations heard about it and had a fair chance to give their views?

The Minister was uncharacteristically uncharitable yesterday at Question Time in referring to consultations under the previous Government. In my modest experience as a Minister, consultations were very important in arriving at and even changing government policy. It would be interesting to hear how effectively the Minister rates the consultation process that took place on the regulations.

At paragraph 7.3 of the Explanatory Memorandum, mention is made of the targets being set higher to offset the exemption for small businesses. Were any problems created through that; were there any specific areas of difficulty? I am not sure what proportion of SMEs are covered by the regulations. Does the Minister consider that the burden that is now on SMEs through the renegotiation of the regulations is reasonable?

In paragraph 7.6 of the Explanatory Memorandum, the Government talk about longer-term targets being set. I would be grateful if the Minister could give us an idea of the timetable for that process. In paragraph 7.7, mention is made of the revenue that can be raised. It states:

“Reprocessors and exporters are not compelled to spend the revenue in any specific way”.

Was any specific obligation on the spending of that revenue ever considered? Does the Minister have any further information about that?

In paragraph 7.10, the Government say:

“Most of the changes will have a negligible impact on businesses”.

I am happy to accept that that is the case, but since “most” is not all, it would be interesting if he could give us any information about what seem to be the most significant impacts of the changes.

Paragraph 7.11, to which the Minister referred, states that there is to be:

“The removal of the requirement on reprocessors and exporters to be independently audited”.

When I first read this I felt some concern, because independent auditing requirements are often extremely important. However, I understand from a later point in the Explanatory Memorandum that the regulators were happy with this change. None the less, I would be grateful if the Minister could tell us whether the regulators have any outstanding concerns about that. I realise that this may not be easy to answer, but can he say whether this requirement for independent auditing happens elsewhere in the EU, given that we are talking about EU regulations?

My final question is fairly basic but important. Can the Minister assure us that nothing in these regulations will affect negatively our recycling targets and the other environmental commitments that we have entered into? We want to be reassured on that point.

Once again, I thank the Minister for the way in which he introduced these regulations and for explaining the large element of continuity in them, which certainly seems to be in evidence.

[Lord Deben]

My Lords, I apologise for not being here for the Minister’s speech, except for his excellent final paragraph, but I was caught in the Chamber, having intervened on what turned out to be a rather controversial occasion. Politeness meant that I had to remain there until it had finished. I should also declare an interest—two interests, really. I was the Minister who invented these regulations and drew up the environmental regulations that were accepted by the European Union. This is unusual, because these regulations were created by Britain and France together to avoid the interference in trade that had otherwise occurred. Therefore, the regulations are permissive in the means by which we meet the ends. It is a very British concept. I also declare an interest as chairman of Valpak, which is the largest of the organisations that help businesses to meet the obligations under the regulations. It is a not-for-profit organisation set up by British industry and covers about 65 per cent of those who have to meet the regulations. I declare an interest, but perhaps I also declare knowing something about how these things work, which is not easy because they are somewhat complicated.

I have to say that there is a real and fundamental disagreement with the way in which the Government have decided to proceed. Britain has managed to become not the worst operator of recycling—as the noble Baroness knows, we have not been very good in our recycling record—by having the most permissive system that you could possibly have. It is very competitive and we have managed to do this probably more cheaply than any other country in Europe. Last year, it cost British business roughly £180 million to meet the obligations. It is likely to have cost German business about £1.8 billion. That is the difference in the efficacy of our systems; this is not a heavy burden on our businesses. Indeed, we actually have a positive advantage, because we run the system so effectively. I have to say that that is because we went in for a good capitalist system—it is competitive. Anyone who provides services has to compete with everyone else; if you do not provide or buy the evidence of recycling at the lowest possible cost, they do not come to you, they go to someone else. There is a real reason for this.

17:00

The other reason why it has worked is that every year the targets have been lifted, not hugely but enough to keep the whole thing moving. Those who provide recycling facilities know that if they invest in them on the basis of this year’s demand, by the next year there will be sufficient increase for that investment to have been worth while. On the one occasion on which the previous Government did not act in this way, it had a very serious effect. Recycling facilities were laid up and the programme for the creation of such facilities was interrupted. It took us at least a couple of years to get back into the system. History shows that when you do this, it has a real effect.

I ask my noble friend why he has decided to do this when almost the whole of British industry is perfectly happy to have gently rising targets. It has accepted that it is a sensible system. The noble Baroness mentioned SMEs. One problem with the system is that it has a very high de minimis level. Because of this, SMEs are to a large extent excluded. They do not normally put enough on the market to bring them into the system. That means that when you talk about meeting a percentage target, it is the percentage of a sum that is affected by the de minimis numbers being excluded. We could even have a situation in which we technically recycled more than 100 per cent of the total amount because we exclude so much at the bottom.

This system is designed to help the poorest, those least able to pay and those with the least opportunity to have a proper system that enables them to manage the bureaucracy. However, I say to my noble friend that I have canvassed opinion widely. The industry, large and medium-sized players alike, very much welcomes the fact that the previous Government went into a system in which they advertised the increase in targets well in advance. People knew that they were coming and very much welcomed that fact. Therefore, when one has fundamentally flat targets, the effect on the system is serious. It is already serious. One has only to look at the effect on glass prices at this moment. They have been very much affected by this knowledge, which has been around for a long time; people have known what the Government had in mind.

I put this to my noble friend; if we have two years of flat targets, there will be a considerable diminution in the amount of money that goes to local authorities. If the targets are low and people do not pay a proper price for recycling, the return to a local authority for collecting, say, bottles diminishes. It may be excluded altogether. A large number of local authorities may find it difficult in these straitened circumstances to continue with their services, which would be a great pity. I know my noble friend thinks that my warnings are not correct. However, we are both Conservatives. Conservatives normally go for their advice to those who actually do the job. There is a universal view among those who do the job that a gentle increase is the way to achieve this end.

I would not have troubled your Lordships on this occasion. Indeed, it is my first attempt to speak in Grand Committee, which is daunting because of the small numbers that are present; it is a curious way of speaking. Perhaps this is an occasion on which declaring an interest is valuable. It shows one’s technical understanding of what is going on. I know that this is not a sensible system because we cannot change the regulations. However, I would like an absolute assurance that, if I am right, my noble friend will not wait for reports from waste committees and so on, but will return to this Committee next year with a change, which is perfectly possible under these regulations, to ensure that local authorities can go on doing their job and that British industry is listened to. That is what it wants. It would be improper of me to quote them, but hardly a household name agrees with the regulations. Most are overwhelmingly in favour of a gentle increase.

Finally, I hope the Minister will set his face against those who somehow think that it is an imposition on British industry to do better in environmental matters than the rest of Europe. One of the things we are up against is that the European Union, of which I am a passionate supporter, is slow in putting all this right, so we are in position in which we can do this. It is a pity that we have not set an example and that we have not moved as we should have. I hope my noble friend will give a commitment to try this. If he is right, I shall be happy to come back on a suitable occasion and say, “Mea culpa. I was wrong; the expert was faulty and the onlooker saw more of the game”. I would be as humble as he would wish me to be. In return, if it turns out that there is a serious diminution in the provision for recycling, and if there is a clear sign that local authorities are finding things more difficult than before, I hope he will give a commitment to come back to the House and lay a new order.

[Lord Addington]

My Lords, after the last speech I feel that I am treading on someone else’s carpet. It was an extremely interesting intervention and both my noble friends should be encouraged to continue talking about the questions raised. If there is a danger that the incentive to carry on will be removed, given the expertise here we should consider that matter. If allies of long standing, new allies and all those who are interested in the field say that there is a danger here, perhaps the Minister can give an assurance that the Government will keep a weather eye on the situation. I would be reassured by that commitment.

It is more reassuring when you hear from someone who genuinely knows what they are talking about; not a parliamentary expert, which is how I interpret someone who has merely spoken on the subject three times, but someone who knows something about it. I hope the noble Lord, Lord Henley, will say that the Government are watching the situation and monitoring these concerns, because if we cannot have a broad church on environmental matters we should give up and go home now.

[Lord Henley]

My Lords, the noble Baroness, Lady Quin, teased me at the beginning of her remarks that I had possibly over-attacked her at Question Time yesterday on the subject of conservation, and I wonder whether I possibly over-egged my remarks. Perhaps I was provoked by the noble Baroness; I am not sure. I accept that her Government consulted effectively on some occasions and I hope she will accept that, when we consult, we consult genuinely and with a real intention to listen. She asked what interest was shown. I can assure her that we had 96 responses from local authorities, producers and trade associations, and that the consultation covered the usual 12 weeks. I hope I can say that we consulted enough; that, as far as one ever can, we got to everyone it was necessary to get to, although one can never guarantee that; and that we covered as many SMEs or their representatives as possible. Very often, SMEs do not have time to respond themselves but have representatives who can.

[Baroness Quin]

In the consultation, did any of the responses raise some of the concerns that have been raised so interestingly today by the noble Lord, Lord Demon?

[Lord Henley]

“Demon”?

[Baroness Quin]

I think I said “Demon”.

[Lord Henley]

It is the noble Lord, Lord Deben. I think the noble Lord, Lord Demon, might be someone rather different. However, that might be for another life of my noble friend.

[Lord Deben]

I hope not.

[Lord Henley]

As far as I am aware, that was not the case. I shall write to the noble Baroness in due course about that.

The noble Baroness then asked about the waste review—again, a matter raised by my noble friend Lord Deben—and when it would come out. Our intention is to publish it in April of that year. April might turn out not to be a suitable month because, as the noble Baroness will know, there are local government elections on 5 May. It might therefore have to be published on 6 May, but I cannot give a precise date other than an assurance that it will be before June.

On independent auditing, again I can give an assurance that, as I made clear in my opening remarks, we are keen to try to reduce the burden on all businesses. So far as I am aware, the regulators were perfectly happy. I am not aware of any concerns. We will continue, as we have said in the past, to make sure that we strive to meet all our recycling targets, and our targets post-2012 will be considered as part of the review to be published in 2011.

I turn to the points made by my noble friend, and again I pay tribute to him for, as he reminded us, inventing these regulations, getting them through with the support of the French—something I hope we will be able to do more often in the future, but we are all learning new tricks at this stage—and getting them agreed. I am also grateful to him for stressing their efficacy and the competitiveness of our system. What my noble friend is saying in effect is that our targets for 2011-12 are not ambitious enough. The simple answer to that is that we will have the review and we want to make sure that we get everything right before we move on.

[Lord Deben]

I understand my noble friend’s view, but this is a continuing system. If you decide to stand aside for a relatively important period, as this would be—if my noble friend can tell me that it will be for only a year I shall be happier—the fact of history is that it takes you several years to catch up if you discover that you do want to raise the targets. As I cannot imagine that anyone in the coalition would want to lower the targets, it might be better to do this as we have done it for the past 12 years.

[Lord Henley]

I can see my noble friend’s argument. In some respects we are continuing with that line. Perhaps I can offer him some encouragement in another field in this area. One of the other drivers of these things is the landfill tax. It will continue with its escalator, which is due to go on up to 2015, at which point I think it will reach £80 a tonne. It is certainly a driver for all those involved in waste when considering how to handle waste. What happens to the tax after that, as my noble friend is perfectly well aware, is not a matter on which I can comment. No doubt colleagues in the Treasury will look at the efficacy of that particular tax because it is one of the most successful taxes that has ever been created in changing behaviour.

My noble friend also said that he has been listening to those who advise him and that he wants the Government also to listen to them. He said that if he was wrong he would come to me, as he put it, covered in sackcloth and ashes and admit it. If we are wrong, I see no reason why we cannot amend things later, but in the mean time we want to get the waste review right. Once we have done that we can look at these issues again.

[Lord Deben]

Can my noble friend assure me that nothing will stop him—let me put it as delicately as that—coming back next year with a revision, or does he really mean that the arrangements for the waste review will mean that it will be at least two years before he can change this?

[Lord Henley]

I cannot give my noble friend an absolute assurance because we want to consider the results of the waste review before we come to decisions. He will know that Governments can do a great deal of things as and when they wish, particularly after publishing a review. I certainly cannot give an assurance that we will do something. All I can say is that we might, if it was necessary. I would then come to the noble Lord in sackcloth and ashes to say “Mea culpa” and whatever else he wished me to say. I am not saying that we will do this; I am saying that it is always a possibility.

[Lord Deben]

Of course my noble friend cannot say that he will do it; indeed, that is not what I asked him. I asked him whether, if it turned out that it were necessary, he would do it. I am sure that he would. My question now is: if it were necessary, could he do it in the time, or could something in the circumstances make it impossible? If nothing in the circumstances would make it impossible, I am happy to rest on his good assurances and he need not say “Mea culpa” to me.

[Lord Henley]

I can never give an absolute guarantee; it would have to be a guarantee given by me at this stage. All that I am saying is that I believe that it would be possible if necessary. I might be wrong, but my noble friend will have to rest on that assurance. The important thing is that we think that it is right and proper to get these things sorted out, as we are doing now, for 2011-12, then publish our waste review and then take things forward and make further decisions thereafter. I know that my noble friend says that the price of glass has collapsed. We have seen that in the past and it has gone back up again. We have seen that with other recyclables. I think we can cope with that. These are not the only drivers in this field; as I mentioned, there is also the landfill tax. I do not believe that we face the problems that my noble friend suggests.

I hope, therefore, that the Committee will accept that at this stage it is right and proper that the regulations go through, and that we will consider them again in the light of the review, which will be published in the spring of next year.

Motion agreed.

Committee adjourned at 5.18 pm.