Draft Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016
Draft State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016
(8 years, 11 months ago)
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The Committee divided: - Ayes: 9 / Noes: 2 - Question accordingly agreed to.
The Chair
I will call the Minister to move the first motion and speak to both the instruments. At the end of the debate, I will put the Question on the first motion, then ask the Minister to move the remaining motion formally.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)
I beg to move,
That the Committee has considered the draft Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016.
The Chair
With this it will be convenient to consider the draft State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016.
Mr Vara
May I say what a pleasure it is to serve under your chairmanship, Ms Buck? May I also extend warm congratulations to the hon. Member for Ashton-under-Lyne on her appointment? I very much look forward to working with her during the months to come.
As both the regulations and the order deal with the new state pension, it is sensible to debate them together. I am satisfied that these instruments are compatible with the European convention on human rights. The regulations deal with four topics. The first is the calculation of increments where a person has deferred their new state pension. The second is transitional arrangements for inheriting graduated retirement benefit. The third is the availability of upratings on state pension where a pensioner is living overseas. And lastly the regulations make a technical amendment to regulations relating to contracted-out occupational pension schemes.
As regards deferral of the new state pension, this provision deals with calculating the weekly increase that a person who defers their new state pension will receive when they finally claim. Specifically, it sets out how that calculation is to be performed when there is a change in the weekly rate during the deferral period for a reason other than uprating—for example, where a person is widowed and becomes entitled to an inherited amount under the transitional arrangements.
The provisions introduced by regulation 4 enable a person in the new state pension system to inherit graduated retirement benefit where their deceased spouse or civil partner is in the old state pension system—that is, they either reached state pension age or died before 6 April 2016. The survivor will be able to inherit half the deceased’s graduated retirement benefit—the same as they would have inherited under the pre-2016 rules. This protection of the old-rules inheritance will apply provided that the same conditions are met as would have applied in the old system and provided that the marriage or civil partnership existed before 6 April 2016. These arrangements mirror the transitional arrangements for inheriting additional state pension set out in the Pensions Act 2014. As graduated retirement benefit was the original earnings-related state pension, the forerunner of SERPS—the state earnings-related pension scheme—it makes sense to treat it in the same way.
The provisions introduced by regulation 4 enable the survivor of someone who reached state pension age before 6 April 2016 and deferred their old state pension to inherit a weekly pension increase or, if applicable, a lump sum payment based on the deferred graduated retirement benefit. Again, there are equivalent provisions in the Act that protect the existing inheritance arrangements for the survivors of people who deferred an old state pension.
Regulation 4 inserts a new part 7 into the State Pension Regulations 2015, providing for restrictions on the uprating of the new state pension for persons living overseas. As hon. Members will be aware, the state pension is payable worldwide, but upratings for people who are not ordinarily resident in Great Britain are generally restricted to people living in the European economic area, Switzerland, Gibraltar or countries with which there is a reciprocal agreement that provides for uprating. That has been the policy of successive Governments for the past 70 years, and these provisions extend the same policy to the uprating of the new state pension. We are, however, introducing a change in the way in which we treat deferral in overseas cases.
Under the existing arrangements, when a person who has deferred their state pension while resident in a country where upratings do not apply finally claims, they will have both the amount of their weekly pension and their deferral benefit based on the current rate of state pension in force. That applies even though pension upratings would not have been received if they had not deferred their pension. The regulations remove that anomaly for those in the new scheme so that we treat people who defer their pension consistently, regardless of where they live.
Regulation 6 addresses a procedural error in an earlier set of regulations, the Occupational Pension Schemes (Schemes that were Contracted-out) Regulations 2015, which were laid before the House on 16 July 2015. In brief, those regulations were made using the negative procedure, but they contained two provisions that should have been subject to the affirmative procedure. We revoked the statutory instrument and remade it on 16 September, minus the affirmative provisions, which are now made by regulation 6. The substantive provision is the insertion of new regulation 27A into the remade regulations. That simply carries forward an existing provision that sets out requirements relating to payment of survivor benefits where a pension scheme has converted guaranteed minimum pension liabilities into ordinary scheme benefits.
The second of the two statutory instruments that we are considering is the draft Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016. As the title indicates, the amendments are essentially technical in nature, rather than implementing substantive policy measures. I commend the regulations and the order to the Committee.
Angela Rayner (Ashton-under-Lyne) (Lab)
It is a pleasure, Ms Buck, to serve under your chairmanship in my debut in a Delegated Legislation Committee. I thank you for your kindness in allowing me to sit down throughout the proceedings. As Members will have noticed, I am not quite operating at full capacity. I had an accident over the weekend, in which I managed to fracture my elbow and damage my ribs. I am sure that that will not stop me carrying out my duty as a member of the Opposition to scrutinise the measures before us.
Angela Rayner
Absolutely—the Opposition have some fantastic Whips. As the Minister outlined, in the Pensions Act 2014, the coalition Government legislated to introduce a new state pension for persons reaching state pension age on or after 6 April this year. We are considering regulations that will implement several key features of that settlement. Several aspects of the new legislation have significant implications for future pensioners, and I will touch on some of them in my contribution.
Under the new scheme, the Government intention is that individuals who qualify for the new state pension will receive it on the basis of their contribution record. The rule that allows an individual, under the current state pension, to derive entitlement based on the national insurance record of a former spouse or civil partner will end, with some transitional protection. Although the changes are likely to affect a relatively small number of people, their impact on those who are affected may be large. Perhaps the Minister will confirm that in an extreme scenario, a woman who has no entitlement in her own right and is widowed could end up with no state pension, rather than the £115.95 she could expect to receive under the current system.
In addition to the amendments on inherited graduated retirement benefit, there are new features that will affect pensioners overseas. In the new pension scheme, as the Minister outlined, state pensions will be uprated in line with earnings only if the recipient is resident in an EEA country or in a country with which the UK has a reciprocal agreement. Furthermore, many people who receive the state pension and who live abroad may have been impacted by the Government’s temperature test for the winter fuel allowance, which was introduced for the first time this winter. The changes could result in an overlap between those who become ineligible for winter fuel allowance and those whose pensions have not been uprated.
State pension deferral is of particular significance. The option to defer one’s pension in order to receive a larger amount has been part of the system since 1948. Under the new state pension, the terms of such deferral will change, resulting in a less generous return. Given that the bulk of the measures before us today are technical, I hope not to divide the Committee, but there are a number of comments that I wish to make and questions that I hope that the Minister can answer. Let me start by making the general point that the Government’s track record in communicating pension changes falls well short of what the public would hope and expect. Recent analysis that the Department of Work and Pensions published on the new state pension makes it clear that millions of people will receive a significantly lower state pension in future. Some will be more than £500 a year worse off. The Government should be doing far more to inform those affected, especially people who are nearing retirement and therefore have the least notice or time to consider the impact.
The same is true for the regulations we are considering, especially the changes to derived entitlement and inheritance rules. The regulations apply to the new state pension that will be introduced in April, so they have come before us are very late in the day, given that they arise from primary legislation that the House agreed in 2014. Perhaps the Minister can tell us why the Government have left it until now to table these measures.
In any event, Age UK, among others, has called on the Government to do far more to contact people who are likely to be affected. In its evidence to the inquiry by the Select Committee on Work and Pensions on the state pension, it said:
“There are DWP materials highlighting credits and ways to increase the State Pension, but people need to know they may be affected. We believe the DWP should contact people with gaps in their record individually to highlight the changes and explain options…In the most extreme situation, a woman with no entitlement in her own right, who is widowed, could end up with no State Pension compared to an expected £115.95 under the current system. Most will have some contributions in their own right so will not lose this much, but they could still receive significantly less than they are expecting. Couples in this situation need to be made aware of the changes as they may be able to review their retirement plans.”
When asked how the Department was planning to communicate with those affected, the Minister for Pensions replied that we cannot foresee who is going to become widowed in future. I think it is fair to say that that is not exactly a helpful response. I would be grateful if the Under-Secretary provided clarity on what action the Government are taking to communicate these changes, in particular to those with gaps in their record who are likely to be directly affected. I believe there is a pool of people they can inform who could potentially be widowed in future.
Will the Minister also give us an estimate of who will be covered by the transitional protection? How many people does he estimate will lose out as a result of the changes in future years? In the context of those facts, what would be the cost of directly contacting individuals with gaps in their national insurance record? Does the Minister think that that cost is prohibitively expensive? While these changes are likely to affect a relatively small number of people, the impacts on those affected may be very large—the Minister may wish to expand on that, based on official estimates. That is one reason why the Select Committee, in considering the draft legislation, recommended that the Government go further in finding a solution for those women who might be seriously affected.
I will not repeat the debates that were had in the House, but if the Minister can give those women any further reassurance on the terms of transitional protection, that would be welcome. In any event, it is crucial that the Government take the issue of communication far more seriously and learn the lessons from previous instances when they failed to communicate changes effectively: most notably, of course, there is a group of women born in the 1950s who were not given proper notification of acceleration in their state pension age.
On that issue, will the Minister inform us whether the Department has undertaken any further work on transitional protection for the group of women most affected? Will he commit to provide the House with details of any modelling the Government have used when looking at different options for transitional protection; for example, for specific cohorts, such as those born between 6 April and 5 December 1953, who will be particularly affected by the acceleration? He will note that I have tabled questions on that subject, but given Ministers’ stated goal of being the most transparent Government ever, perhaps he can commit to answering them fully and publishing the relevant material before Monday’s debate on the issue.
Turning to another aspect of the regulations, many people who live abroad and receive a state pension may have been impacted by the Government’s temperature test for winter fuel allowance, which was introduced for the first time this winter, as I mentioned. Will the Minister tell the Committee how many people became ineligible for winter fuel allowance as a result of these tests? What is the overlap between those who became ineligible for winter fuel allowance and those whose pensions have not been uprated?
As well as freezing overseas pensions, the Government are freezing the savings credit element of the pension credit, as announced in the autumn statement. Will the Minister confirm that some of Britain’s poorest pensioners will be worse off as a result of this measure, and will he commit to publishing a more detailed impact assessment than has been produced to date? Exactly how many people will be worse off, and by how much? Finally, on the issue of state pension deferral, how much do the Government expect to save from the changes to the deferral? How many people have chosen to defer their state pension in this financial year, and what are the Government doing to ensure that those who defer are made aware of these changes to the deferral provisions under single tier pensions? I hope that we have some substantive answers on those points and in that spirit I look forward to the Minister’s response.
Steve McCabe (Birmingham, Selly Oak) (Lab)
It is a pleasure, Ms Buck, to serve under your chairmanship. May I clarify a couple of points with the Minster? First, I notice that the explanatory notes say that we are doing some of this because a few months ago, in July, the Government got it wrong. Is the Minister absolutely confident that he has got it right on this occasion, at least in terms of what he is trying to do? If he can offer any explanation about what he got wrong back in July, people would be interested to know.
Secondly, there are widows who could lose out under these arrangements and end up either with no state pension or a small amount of money. Will the Minister say more about how many people we are talking about and what estimates he has made? It would be a terrible pity to see this go through and find out afterwards that the Government were not sure about their figures.
On the question of divorcees, what is the rationale for saying that divorced women can no longer rely on their former spouse’s national insurance record? That is quite a big change, which could discriminate against a number of women. Will the Minister offer advice about how many people we are talking about and what led him to that conclusion?
Finally, I understand that under these transitional arrangements there will be some protection for spouses and civil partners, but not for people who cohabit. Given that, under all the other social security legislation, if people are cohabiting that counts towards their entitlement, why has the Minister decided to pick on that particular group in relation to pensions? I am not sure why we are not opposing this, but before we have a vote it would be helpful to know how many people we are talking about. This seems to be a whole series of regulations. I did not get a single figure from the Minister during his two-minute explanation to the Committee on how many people are affected by what he is planning to get through today.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure, Ms Buck, to serve under your chairmanship. The changes to the rules on derived and inherited rights are a complex part of the reform package. In its evidence to the inquiry by the Work and Pensions Committee aimed at understanding the state pension, Age UK called on the Government to ensure that those who could be worse off due to the reforms are a priority for communications. As been referred to, communications have been a big issue in many pension matters in the past few years. A priority for communications should be to reach groups who may have planned their retirement income based on the current system but could be worse off due to the reforms. Particularly for women, the loss of derived and inherited rights to the basic pension could reduce entitlement. In the most extreme situation, a woman who is widowed with no entitlement in her own right could end up with no state pension, compared with an expected £115.95 under the current system.
Most women will have made some contributions in their own right, so they will not lose that much, but they could still receive significantly less than they expected. Couples in that situation need to be made aware of the changes so they can review their retirement plans. The Department for Work and Pensions said that as part of its communication activity, it is targeting specific groups such as the self-employed and those with low qualifying years, who may be at risk of failing the minimum qualifying period, as well as those impacted by the changes to the derived entitlement and inheritance rules. The experience of communication regarding the increase in the state pension age suggests that it is reasonable to question whether the Department should not go further and, as recommended by Age UK, directly contact individuals with gaps in their national insurance record.
Like the Labour spokesperson, we remain concerned over the whole WASPI—women against state pensions inequality—issue. There was a debate a number of weeks ago in the Chamber, when the House divided and expressed its opinion clearly by 158 votes to zero. What is parliamentary democracy if the Government feel they can ignore the will of the House? Finally, on frozen pensions, we remain concerned that those who have an entitlement to a UK pension are being denied their full rights. If we do not get sufficient answers this afternoon, the Scottish National party will oppose these measures.
Mr Vara
My thanks to the three contributors to the debate. I will try to address as many of their questions as possible. I will start by clarifying a point in the argument about women who might have no entitlement to pension. Under the transitional arrangements, a woman may still inherit a proportion of her late spouse’s additional state pension or half of his protected payment, depending on when he reached state pension age.
I was asked why my Department has left it until now to introduce these measures. I hope the Committee will appreciate that time is needed to develop legislation underpinning the new state pension, and to secure parliamentary time for debating and making the necessary legislation. It has been suggested that Government should do more to inform those affected by the changes to entitlement. The Government are always looking for the channels and media that work best. People sometimes assume that direct mail is the right approach, but experience has shown that is not necessarily the case. We have undertaken direct mail exercises in the past, and evidence suggests that other communication channels can be as or more effective.
My Department conducted a test in 2014 issuing 6,000 personalised letters with the aim of encouraging people to ask for a state pension statement, and only 79 requests for a statement resulted from that mailshot.
Steve McCabe
I understood that the Department’s justification for not notifying people was that it had been given some advice around data protection. In those circumstances, what are the other communication methods that the Minister referred to?
Mr Vara
I am sorry to state the obvious but, other than writing letters, there are social media, emails, articles in newspapers and other publications. There are a variety; I list only some of them. Sadly, the hon. Gentleman does not seem to have moved into the 21st century and still seems to think that everybody should get a letter through their letterbox. Times have moved on and he needs to move with them.
Steve McCabe
The point, which the Minister may have missed, is that if his Department has genuinely been given information about data protection and that has limited the number of letters it can send to people, what information has he had about emails and social media? He can stand there and pretend he is in the 21st century, but how many emails and other examples of social media has he used with individual people and what data-protection advice did he get before he did so?
Mr Vara
I do not think anyone in the Committee would expect me to give precise numbers about how many emails have been sent out by a specific Department. If I may remind the hon. Gentleman, his original question was what are the forms of communication. That is the question I answered. If he now wishes to change the question and say he wants specific numbers, because he is not happy with the answer I gave, I think the Committee will be sympathetic to the response that I cannot give the precise number of emails that have been sent out.
Ian Blackford
This is a massively important point. Anyone who is involved in an occupational pension scheme or any other type of scheme, will be used to getting annual letters telling them exactly what their entitlements are. Given the importance of this, the Government must communicate with all potential pensioners in a fair and reasonable manner. That means that the DWP has a duty to inform such people by letter—that would be the established practice. I cannot for the life of me understand why the Minister is hiding behind data protection. The Government have a duty to make sure that people prepare adequately for their pension. The Government must take that responsibility and communicate effectively.
Mrs Maria Miller (Basingstoke) (Con)
I thank the Minister for giving way and for being generous with his time. Can he inform the Committee of historic response rates to the sort of letter that he is talking about? Is it equivalent in some way? What advice has he been given on how to improve response rates through the use of new media, such as the social media to which he referred?
Mr Vara
I do not have the precise details to hand, but I can say that it is an accepted fact that many people now use the new form—the technological advances of the 21st century—for communication purposes. We fought a general election less than a year ago in which the modern form of communication was used by politicians across the political divide. If it were the case that that was ineffective, and people were not taking note of that, we as politicians who aspire to lead and represent our constituents would probably have resorted to the old system. The fact is that the new, modern communication does work and that is why every single person in this Committee resorts to it.
As I said earlier, when DWP conducted a test in 2014 issuing 6,000 personalised letters with the aim of encouraging people to ask for a state pension statement, only 79 requests for a statement resulted from that mailshot. I think that answers the questions more than anything else.
Angela Rayner
May I try to help the Minister? In my contribution, I was referring to the fact that we have to learn the lessons from the past. Since becoming the shadow Pensions Minister, it is clear to me—and my mailbox makes it clear—without going into the issues of the WASPI campaign and women in the 1950s, that people do not feel that they are being communicated to in the most effective way. I urge the Minister to take all opportunities—written, social media, magazines, telephone—to do so. Whatever way he does it, it needs to be done, because of the implications for some of these people. It is not acceptable for the Minister to say, “Well, it may not affect them because they may not be a widower”. Something needs to be done to improve communication to people who are affected by these measures.
Mr Vara
I take on board what the shadow Minister says. Following the Pensions Act 2011—I know we are not dealing specifically with that issue—millions of people did get a letter, and the letters were sent out according to the details that were held by Her Majesty’s Courts and Tribunals Service.
Sammy Wilson (East Antrim) (DUP)
First, will the Minister accept that using social media for the target group that we are talking about is probably one of the most inappropriate ways, since the people coming up to retirement age who require this information are the least likely to use it?
Secondly, rather than put the onus on the people who might need information about their pension, would he accept that perhaps the information should be given to them? Surely DWP knows where there are gaps and where people are likely to be disadvantaged by the changes. Should they not be notified by the Department, rather than the Department requesting them to make contact?
Mr Vara
There is no one specific form of communication that my Department will be looking at. We recognise the various forms of communication that exist in the modern world and we will seek to use some of those as we feel they will best target the relevant people. I take on board what the hon. Gentleman says, but it is important to recognise that there is no single form of communication that we use. We recognise that in the modern world there are various forms and communicate accordingly.
Ian Blackford
This is a massively important point. We all understand that social media is a wonderful tool—the Minister has referred to what was done in the election campaign and so on—but we are talking about the fundamental right that people have to a pension. People have paid national insurance; they deserve to be told by DWP what they are going to get. That is not a message to be delivered by social media, it is a message that should be delivered by letter. That is the right thing to do, and the Government must do it.
Mr Vara
May I put on record, since we are talking about how my Department ensures that people know about the changes, as well as all the items I have just mentioned, the “Know the Facts” communication campaign focused on building awareness for those aged 55-plus, who will be the first to reach state pension age after the new state pension is introduced? That campaign encouraged people to get a personalised statement. Between September 2014 and October 2015, nearly half a million statements were issued. In the current phase of the campaign we are looking at specific groups who may need more detailed information, including people who have been contracted out, have been self-employed, may have a low number of qualifying years, or may be affected by changes to the rules on deriving an inherited state pension.
A range of products is available to help people understand the impact of the changes. These include factsheets, infographics, videos, calculators and content for PensionTube, a YouTube channel dedicated to pensions. The campaign advertising also encourages people to engage with material online, and there is a range of supporting materials on www.gov.uk. We have in place extensive stakeholder communications with third-party organisations and have held stakeholder forums, produced a toolkit for stakeholders and continue to issue weekly stakeholder bulletins. We do communicate with the relevant people outside, we will continue to do so, and we will continue to make sure that people are appreciative of the message. I commend the regulations and the order to the Committee.
Question put.
Draft Producer Responsibility Obligations (Packaging Waste) (Miscellaneous Amendments) Regulations 2016
(8 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rory Stewart)
I beg to move,
That the Committee has considered the draft Producer Responsibility Obligations (Packaging Waste) (Miscellaneous Amendments) Regulations 2016.
It is a great honour to serve under your chairmanship, Mr Streeter. I will provide a quick overview of the regulations. Packaging really matters. We produce nearly 10 million tonnes of packaging every year, and Britain is now doing quite well at recycling packaging. We were down at about the 20% level, but we drove that up to 64.6% in 2013, which is good. To put that in context, household recycling rates are still hovering around the low 40% range.
While recycling is important, it is also important to understand that packaging does some good. For example, it extends the life of a cucumber by about 11 days and doubles the life of meat. Resealable packages prevent stuff from drying out. I saw the importance of packaging directly in Afghanistan, which has amazing apricot production, but is completely unable to access international markets because it has no packaging industry that is able to develop safe packages so that apricots are not damaged during transport.
Although packaging is intrinsically important—it is good for preserving food and for preventing waste—the recycling of packaging also has incredible potential for the British economy. Recycled plastic, paper, glass and metal from packaging can be used for everything from chairs to car parts and construction materials. Glass, above all, is an amazing and almost infinitely recyclable material. It is difficult to get exact costs for the financial damage of packaging waste, but it is worth bearing in mind that councils spend nearly £798 million a year cleaning up litter, about 30% of which is packaging in some form or another.
The regulations will do four things. First, they will remove the requirement to produce operational plans. Secondly, they will change the approving body for packaging waste. Thirdly, they will change sign-off arrangements and, finally, they will create a one-stop shop. I will go through those changes briefly.
When packaging recovery notes were set up in the early 2000s, a requirement to produce elaborate operational plans was imposed on every company. Over time, we discovered that there were some good things about those operational plans and some things that were perhaps less good. We aim to keep the good things by retaining some conditions, but we are getting rid of those things that, frankly, turned out to be largely bureaucracy and paperwork.
Vast operational plans have been produced, and the first problem with them, of course, was that as the PRN system is a market-based system in which people trade their packaging waste, the operational plan system was more of a central planning system in which companies were expected to predict how much plastic and aluminium they would produce by the end of the year. That was a bit foolish, because they were trading waste throughout the year, so the actual amount of waste was determined by market mechanisms, not the plan produced at the beginning of the year.
We also discovered through extensive surveys conducted over nearly 15 years that, unfortunately, people were not really reading the operational plans and the relevant agencies were not making full use of them—they were very thick documents—so we have gone for a simplified system. The conditions on which we are going to insist are those that really matter to most plans. The first condition is making sure that information is gathered accurately. The second is making sure that, when PRNs are traded, that happens in a way that does not hinder the operation of the market. It is possible at the moment for a company, if it is feeling nervous, to buy a huge number of PRNs and effectively to distort the market, so we are trying to ensure that the compliance conditions do not allow that. The final condition is making sure that companies have the financial resources to have staff on their team with the relevant expertise to work out how to deal with packaging. Those are the three key conditions.
Secondly, we are changing the approving body. At the moment, the approving body tends to be the Department for Environment, Food and Rural Affairs, or the equivalent in the devolved Administrations. We are passing that responsibility down to the agencies. In England, the responsibility will transfer from DEFRA to the Environment Agency; in Scotland, it will transfer to the Scottish Environment Protection Agency; and in Wales, it will transfer to Natural Resources Wales. A similar process will occur within the Northern Ireland Administration.
Thirdly, we are changing the sign-off arrangements. At the moment, we are in the slightly absurd position that the chief executive of Tesco him or herself must sign off on the PRNs every year. Such businesses have immense packaging teams involving experts on packaging and recycling, so we will allow them to delegate the authority to sign off away from the chief executive’s desk and down to the part of the team that actually deals with packaging from day to day.
Finally, we are setting up a one-stop shop so that businesses operating in Wales, Scotland or Northern Ireland will not have to jump through two hoops to get their PRNs signed off, for example by Natural Resources Wales, and then by the Environment Agency. A sign-off by Natural Resources Wales will be sufficient to qualify for trading across the rest of the United Kingdom.
The Government consider that the changes will reduce costs on businesses—not by an enormous amount, but significantly. Over a 10-year period, we think that they will save about £20 million. Above all, this is not just about financial savings; it is pragmatic and common sense. The measure brings a greater focus, and makes the whole process less burdensome and more efficient to ensure that we achieve what I think all of us on both sides of the House want: an increase in the quality and quantity of our recycling of packaging. I commend the statutory instrument to the Committee.
Alex Cunningham (Stockton North) (Lab)
It is a pleasure to serve under your chairmanship for the very first time, Mr Streeter, and to have the opportunity to share my thoughts on the regulations, which appear to lack any element of controversy, although that, of course, does not minimise their significance. The Minister spoke of packaging as important for both its planned use and its recycling value, but the management and disposal of packaging waste and batteries can result, among other things, in the production of greenhouse gases and, if not handled correctly and effectively, further environmental consequences through the impact of landfill.
I agree that those greater considerations are often not at the forefront of the minds of consumers or indeed producers—or at least not as often as they should be, especially if we are to meet legally binding reuse and recycling targets of 65% by 2025 and 75% by 2030. EU analysis of recent trends suggests that further progress on resource efficiency is possible and that that might bring major economic, environmental and social benefits, which the Minister talked about. Stronger measures to close the loop and create a circular economy by transforming waste into a resource are an essential part of the necessary increases in resource efficiency.
As the Government’s impact assessment notes, without intervention, recycling levels would be insufficient. Placing some—only some—of the cost burden in the hands of packaging handlers and producers, as well as battery producers, helps to focus their minds on cost, and that is mitigating some of the environmental impacts to bring about a more efficient outcome. That all builds into the broader picture of employing economic incentives to entice producers into putting greener products on the market while supporting recovery and recycling schemes for their packaging, batteries and so on.
It is worth noting, however, that the stated aim of the regulations is to reduce the burden of producer responsibility obligations on businesses. The Government’s impact assessment notes that the current regime imposes costs on businesses that could be reduced without affecting its overall impact. I am clear that any reduction in burden for businesses must be achieved by improving the effectiveness of the schemes and must not come at the expense of the success of the new regulations. With that in mind, I welcome the Minister’s outlining of what steps the Government are taking to ensure that the removal of the requirement for operational plans to be submitted—a standard indication of best practice in many sectors—neither weakens the regulator’s role in ensuring that producers meet their obligations, nor undermines its role in monitoring performance.
Operational plans have traditionally been employed as a mechanism to ensure that schemes consider how they will meet a set of identified obligations and ultimately provide a framework within which regulators can monitor performance. Will the Minister therefore explain in a little more detail how regulators will be expected to monitor performance in the absence of operational plans? Will he also provide further details on future reporting standards in the absence of operational plans, such as the need for accurate data reporting and transparency? I know that he alluded to that briefly in his speech.
We are aware of the huge budget cuts suffered by the Department and the additional strain that the recent disastrous floods have placed on resources, but there is a cost associated with the changes made by the regulations. Will the Minister explain what additional funding the Environment Agency, the Scottish Environment Protection Agency and National Resources Wales will receive when they become the appropriate authorities responsible for granting approval for such schemes, rather than the Secretary of State? Let us not forget that budgets are already stretched across the Department and its various agencies, and that there are now hundreds of people fewer to do the work than before, which requires more from those people who remain in post.
None the less, the streamlining of the approval process across Great Britain and Northern Ireland is to be welcomed, especially because companies now will not have to apply for approval in both territories. However, easing the regulatory burden in this manner still causes potential headaches. With the creation of several appropriate authorities, the need for cross-border consistency is paramount if the regulations are to be successful in balancing the cutting of red tape against achieving improved outcomes. Will the Minister give us further particulars of the steps that are being taken to ensure that we achieve that consistency?
To refer back to the Government’s impact assessment again, doing away with the requirement for operational plans in the packaging sector is estimated to produce a saving of some £5 million over 10 years. The saving in the batteries industry alone, once requirements for operational plans and annual approval are removed, is put at around £300,000 over the same period. These are not insignificant savings and they are to be welcomed if they can drive higher rates of recycling and lower levels of waste while encouraging more companies to take a socially responsible approach. However, we must ensure that the consequences of any such actions, intended or otherwise, are properly considered before a decision is made so that we prevent progress towards meeting targets from being undermined. I look forward to hearing the Minister’s response.
Mr Geoffrey Robinson (Coventry North West) (Lab)
It is a pleasure to serve under your chairmanship, Mr Streeter. May I compliment the Minister on an admirably economical exposition of his proposals today and, more specifically, on disregarding whatever official brief had been provided for him, which made his speech more intelligible and enjoyable?
I will not detain the Committee for long, but with all such reorganisations, there is a danger that they become a new form of delay, or a new bureaucracy to replace the old. The hon. Gentleman is a relatively new Minister, but he has already established something of a reputation and he will not want that to be marred in any way.
My hon. Friend the Member for Stockton North talked about the savings to be made and the greater efficiency of the accelerated process, which we are all aiming at. We will be able to use the overall savings as a way by which to monitor the reorganisation, but could we also have some more specific figures—just in very simple terms—about the effectiveness or otherwise of the reorganisation that the Minister is about to carry through? Often we are plunged into reorganisations that are ill thought through and that get us in a bigger mess than what we set out to solve in the first place.
I thought that the Minister seemed a little complacent about the extent of our success at recycling waste. I think that our recycling levels are still notoriously bad compared with some of our better European neighbours, although I would love the Minister to correct me on that, if he can do so. I do not think that we should be complacent in any way, but if he could tell us how far we are behind the best exemplars in this particular sphere, I am sure that the Committee would be interested.
Rory Stewart
Let me deal briefly with the two challenges that have been set. First, I take on board the points about examining the effectiveness of the compliance and comparing European rates with the British one. To take that last point first, it is absolutely true that we have a lot to learn from other countries, and not only outside the United Kingdom, but even within the United Kingdom. Wales, for example, is doing interesting stuff on getting a single, unified recycling system across the nation, and that is something that we would like to see, particularly for household waste. It is also true that the United Kingdom’s approach to packaging waste is very different from that in Belgium or Germany. We have created a market, effectively by trying to incentivise companies such as Tesco to reduce their packaging waste through attaching a cost to that waste and then allowing them to decide how to act, whereas some continental European countries simply take a much stronger legislative approach that involves compulsion.
That said, we are about mid-table at the moment, and our rate of 64.5% is pretty good in European terms. Germany and France have higher rates, but they have much more expensive systems. It is difficult to compare apples and oranges, as their systems are compulsory, rather than market-based, and they are achieving their rates through huge public expenditure that we do not incur. However, we are considering the PRN system carefully, and we will be taking the matter forward through the circular economy discussions in Europe to find out whether there are things that we can learn. Our gut instinct will probably be to encourage other European countries to follow our lead, but I agree that we in Britain should never be too complacent, and we have a lot to learn from other people.
Mr Robinson
Although those countries have more expensive systems, the point is the net effect. Is that paid for by the higher rates that they achieve? How do the Scandinavian countries fare, particularly Denmark and Sweden? There seems to be a little complacency about how the artificial market that we have constructed is working.
Rory Stewart
That is a deep and important question. It goes back all the way to the design of the scheme in the mid-1990s, when the decision was made to create a market-based system rather than a compulsory one. Our view is that we have the right balance at the moment between recycling rates and costs. It would put a huge burden on businesses and the public purse if we were to adopt a compulsory system, but I would be comfortable about sitting down with the hon. Gentleman outside this room and having a more fundamental discussion about the market-based system.
We are, however, here to talk about not the market-based system itself, but issues such as operational plans and how they are implemented. Moving on to the challenges rightly made by the hon. Member for Stockton North, I welcome the fact that he is taking on board three out of four of the changes: having a simple, single port of call; ensuring that the system is delegated down to the appropriate level within the company; and ensuring that the change of approving body goes through.
On the removal of operational plans, the central question is what we are trying to achieve. Obviously, we are trying to drive up our packaging recycling rates. We have moved away from an operational plan system to a compliance system because, unfortunately, although the operational plans sounded good in theory, we discovered that people were not reading or updating them, and they were not a very useful tool for monitoring how people did packaging recycling. Ultimately, 80% of the operational plans did not represent useful information for achieving what we want—to increase the packaging recycling rate.
We believe that moving to a compliance system will allow the Environment Agency to take a more risk-based approach and will, above all, allow it to use more intelligently the market system that I have just been debating with the hon. Member for Coventry North West so that it can examine the data provided and the number of PRNs being traded, and ensure that we are achieving targets as they are set. We have heard a lot about that, for example in relation to aluminium this year. We do not believe that the operational plans are the correct way to achieve that.
That brings me to the challenge from the hon. Member for Coventry North West about how we will check that the system is working. There are two ways to do so. First, through my colleagues at DEFRA, who proposed the regulations and are working closely with the industry. The second point is that, to be honest, those in the industry with which we are working, from the packaging industry through to Tesco, are not quiet lambs who will go gently into a system that they believe to be bureaucratic, wasteful and not effective at achieving targets. One reason why we have introduced the changes is that we have had a lot of active, energised conversations with the industry over 10 or 15 years. I would expect those people to keep pushing hard. If they do not feel that they are achieving the savings that they want and the recycling rates that we need, they will come back to us in a tough way.
Alex Cunningham
Before the Minister concludes, I also asked questions about the how the management of the scheme by the new responsible body will be resourced and the consistency of implementation across the nation.
Rory Stewart
Those are two separate questions. Consistent implementation across the nations will be key, because what we are doing with the one-stop shop is to ensure that if England signs off on something, Scotland is prepared to accept that standard. To achieve that, we must ensure that our agencies work closely together, and we are working closely with the devolved Administrations.
The hon. Gentleman’s first point was about ensuring that the agencies are properly resourced when signing off on PRNs. Our current assessment is that they are properly resourced, and that the agencies are the right body to carry out that role. We have had long conversations with the agencies about taking that forward. However, I absolutely take note of that point, and we need to watch the situation carefully over the next three to five years to ensure that the job is being done properly.
We have had a distinguished turn-out of Committee members from both sides of the House, whom I thank for coming along. I am grateful for Members’ comments and questions, and I commend the regulations to the Committee.
Question put and agreed to.