Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024

Thursday 28th November 2024 Grand Committee

Considered in Grand Committee

13:45

Moved by

[Baroness Hayman of Ullock]

That the Grand Committee do consider the Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024.

Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, these regulations were laid in draft before the House on 24 October 2024. They introduce extended producer responsibility for packaging, which I will refer to as pEPR, in England, Wales, Northern Ireland and Scotland.

PEPR is one of the three core pillars of the Government’s ambitious packaging reforms, alongside the forthcoming deposit return scheme and the simpler recycling programme in England. These will overhaul the packaging waste system, introducing the biggest change to policy in a generation. Collectively, the packaging reforms are estimated to deliver carbon savings of more than 46 million tonnes of carbon dioxide equivalent by 2035, valued at more than £10 billion in carbon benefits.

The new system established under these regulations will modernise the producer responsibility system for packaging in the United Kingdom by shifting the costs of managing discarded household packaging from taxpayers to those businesses that supply packaging and by applying the “polluter pays” principle. These regulations also implement international best practice, exemplified by the mature systems of our European neighbours, including Belgium and Germany, where comprehensive EPR schemes have been in place for some time.

I am sure that Members will note that this SI was drawn to the special attention of the House of Lords by the SLSC. I assure Members that this was on the grounds of it being politically or legally important and it giving rise to issues of public policy that are likely to be of interest to the House.

I turn to the benefits of the scheme. The revenue raised by this new system will generate more than £1 billion annually to support local authority collection, recycling and waste disposal services. This will benefit every household in the UK and stimulate much-needed investment in our recycling infrastructure. This will make a substantial contribution to the benefits of the packaging reforms, which together are estimated to support 21,000 jobs in our nations and regions, and will help to stimulate more than £10 billion of investment in recycling capability over the next decade. Revenue from pEPR will create a much-needed injection of resources into local authorities to improve the household kerbside collection system across the UK. In England, this revenue will fund the simpler recycling reforms that will enable consistent collection of all dry packaging materials, ending the postcode lottery for recycling.

Taken together, these reforms will support this mission-driven Government’s ambition to kick-start economic growth and create the foundations required to transition to a circular economy for packaging in the UK, ensuring that resources are kept in use for longer. It is a critical first step in meeting the commitment in our manifesto to transition to a resource-resilient, productive, circular economy that delivers long-term, sustainable growth.

I will now look at the new obligations that the legislation will bring in. First, these regulations introduce an obligation on businesses that supply household packaging, referred to as “producers”, to pay the costs incurred by local authorities in managing that packaging once it has been discarded. Producers will also be obligated for the cost of providing public information about the correct disposal of packaging. Producers will start incurring fees from April 2025, and invoices will be issued from October 2025 for the 2025-26 scheme year.

Additionally, from the second year of the scheme, producer fees will be adjusted to incentivise producers to make more sustainable decisions at the production/design stage, including decisions that make it easier for products to be reused or recycled at the end of life. This will mean that a producer who uses packaging that is not environmentally sustainable, such as packaging that is not widely recycled, will incur higher fees. Conversely, those using packaging that is sustainable and readily recyclable will incur lower fees.

It is right that businesses bear the costs of managing the packaging that they place on the market, but we must also protect the small businesses that are the life and soul of our high streets and the backbone of our economy. That is why only businesses with a turnover of more than £2 million and which supply more than 50 tonnes of packaging per year will have to pay disposal fees under this new system.

To administer this system, the regulations require the appointment of a scheme administrator jointly by the four nations. This body will be responsible for the implementation of pEPR. This will include the setting of producer fees and the apportionment and payment of those fees to local authorities in order to fund their waste management services. This scheme administrator will initially be hosted within Defra.

I turn to the detail of the obligations that have been retained from the current producer responsibility system. This instrument revokes and replaces the Packaging Waste (Data Reporting) (England) Regulations 2023, along with the equivalent regulations in Wales, Northern Ireland and Scotland. The requirement for packaging producers to collect and report data on the amount and type of packaging that they supply is carried over from these regulations, as amended. This data is used to calculate producers’ recycling and fee obligations.

This instrument also revokes and replaces the Producer Responsibility Obligations (Packaging Waste) Regulations 2007 and the equivalent regulations in Northern Ireland. As was the case under these regulations, this instrument places obligations on producers to ensure that a proportion of the amount of packaging that they supply is recycled; it also requires them to provide evidence of this to the regulator. These requirements apply to all packaging, not just packaging likely to be disposed of in local authority household collections. To meet this obligation, producers must demonstrate compliance by obtaining packaging recovery notes and packaging export recovery notes from recycling facilities or those who export packaging waste for recycling.

I turn to compliance and enforcement. This instrument provides the four national regulators with enforcement powers and a duty to monitor compliance. It contains strong enforcement measures, including criminal offences and powers for regulators to impose civil sanctions in cases of non-compliance. As is currently the case, the monitoring and enforcement activity for the producer responsibility regime will be funded by the associated charges in these regulations, such as those for registration and accreditation. These charges operate on a cost-recovery basis; as such, they have been increased from the 2007 regulations to reflect the new duties placed on the regulators and the increased level of monitoring and audit activities.

In conclusion, there is no such place as “away”. It is therefore critical that we create the foundations required to transition to a circular economy for packaging, in order to ensure that resources are kept in use for longer and to secure vital carbon savings. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Minister on and thank her for bringing forward these regulations, which I wholeheartedly support; I also thank her for her clear exposition of what they contain. I have a couple of questions.

The Minister set out the responsibilities, particularly around informing households of what they are required to do. I understand that a lot of the waste that is contaminated cannot be effectively disposed of and recycled. Does the Minister know what percentage of household waste that constitutes, including whether it has gone up or down in, say, the last five or 10 years?

I am grateful to the Wildlife and Countryside Link and the Green Alliance for the joint briefing that they have produced for our use. I am also grateful to the Minister for drawing attention to the Secondary Legislation Scrutiny Committee’s report, which gave a very helpful background.

My understanding is that the regulations relate only to recycling. I wonder why the department has focused on recycling and not reuse. I have asked on a number of occasions both the Minister and her noble friend the Minister for Energy, the noble Lord, Lord Hunt, what the Government’s policy on energy from waste is. It is a good way of using household waste that has been contaminated and cannot be reused. It also prevents it going to landfill, which I understand is where most of the waste that is not recycled will go. So it not only reduces household waste and disposes of it in an energy-efficient way; it also provides an energy stream that other countries in Europe use to great effect. My late aunt and uncle in Denmark had their household heating provided by energy from waste at a reduced rate, so there was a community interest in taking it up. I have not heard anything from the Government—either this department or the department for energy—as to their views on energy from waste.

The Minister referred to kerbside collections, the cost of which is obviously quite high. I have now lost the page but one of the figures relates to the substantial cost of kerbside collections. Is it the idea that household collections will be performed by local councils, which will be reimbursed under the regulations by the funds raised? I think that the Minister alluded to this; that would seem very sensible indeed.

With those few remarks and questions, I commend the regulations, but I am interested to know how much will go to landfill; why the Government have not looked at reuse; what the percentages are for contaminated materials that cannot be recycled; and what the Government’s views are on any residual household waste going to energy from waste plants.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for her extensive introduction to this long-awaited SI. This is a complex issue; it has taken Defra and the Government since 2019 to bring it to this stage. I congratulate both of them on managing to get the devolved Administrations to sign up to more or less the same scheme, which should make things easier. I have received briefings from various producers and had face-to-face meetings for several years, and I was beginning to think that we would never get here. I am grateful to those who provided me this week with briefing material, as well as to the Secondary Legislation Scrutiny Committee for its report.

The opening section of the Explanatory Memorandum refers to implementing the “polluter pays” principle. That is to be welcomed. This is an opportunity to use the extensive powers in the Environment Act 2021 in order to implement the best environmental outcomes and to support the efficacy of reuseable packaging systems.

This SI obliges producers to provide evidence of the type of their recycling to the regulator. However, there is no information on how this is to happen, except that those manufacturers with a turnover of more than £2 million and which produce more than 50 tonnes of packaging will do this once a year. These producers will pay the fees to local authorities. Those with a smaller turnover of more than £1 million will have to report their recycling type but will not have to pay fees. There is nothing about how the information is to be collected by the manufacturer and what the format is for it to be reported.

I regret to say that this is something of a “get out of jail free” card. Defra and the Government are placing a great deal of trust in those who will pay the fee to provide the evidence of their recycling. The regulations include the principle, at Regulation 62(2)(b), that producers can offset fees for packaging that they market, as well as where they collect and recycle that packaging through self-funded initiatives.

There is a risk that producers could claim they have collected and recycled packaging when this is not the case. Research shows that 70% of soft plastic packaging waste collected by supermarkets for recycling was, in fact, incinerated. Can the Minister say why is there no standardisation of how evidence of recycling is to be provided?

14:00

Both the EM and the Secondary Legislation Committee report refer to the Secretary of State for Defra, the Ministers of the devolved Administrations and the Government appointing the scheme administrator. Can the Minister say what the process for this appointment will be? Will it be open competition among those involved in the waste management industry, or some other process involving the Environment Agency or another NGO? I would be grateful for some clarity on this aspect of the scheme. I can imagine a large amount of money being allocated to the scheme administrator’s role; therefore, the appointment process needs to be transparent.

The EM refers to the packaging waste recycling note and the packing waste export recycling note; the Minister also referred to them. There are new regulations for reprocessors to register with the regulator of the DAs and Defra. This is especially important if we are to continue exporting waste, instead of dealing with it ourselves. There have been some desperate stories of what has happened to our waste when it is sent overseas. One very worrying aspect of this scheme is that accreditation of reprocessors and exporters to issue PRNs and PERNs remains voluntary. This gives the impression that our waste could be disposed of in an unregulated manner. Can the Minister comment on this?

I am sorry to ask so many questions, but I admit I am disappointed that we do not seem to be any further forward with a deposit return scheme, especially as the fees to be applied to the producers under this SI are based on the weight of the waste. This severely penalises glass producers, whose product is eminently recyclable. Glass faces policy fees per unit that are over 40 times higher than those for plastic. Five thousand glass bottles can be manufactured compared with 67,000 plastic or aluminium containers of the same size. Manufacturers of aluminium beverage containers will not pay any fees at all until a DRS starts in October 2027, giving them an advantage. Can the Minister say why there is nothing in the impact assessment on the impact of material switching away from glass, which, as I said, is one of the most recyclable containers?

Defra’s impact assessment indicated that implementing the pEPR will hit expenditure for the average household by between £27.98 and £55.95 per year. This may seem small but, as it stands, consumers will pay more for glass than plastic. British Glass estimates that a basket of 10 household items with glass packaging will cost the consumer an extra 52.18p in pEPR taxes, whereas the same products in plastic would pay just 7.89p in pEPR fees. This is a direct incentive to use more plastic, which is a lot less recyclable. Surely this cannot be what the Government intend, given the devastating effect of plastic on the environment. I am surprised that Defra has not designed the pEPR to take account of the per unit cost, which would create a level playing field for all materials. Is the Minister able to say why this has not been part of the scheme and whether she will ensure that it becomes part of it?

Local authorities will collect the fees annually. They have recycling performance targets, some of which relate to kerb-side collections. These vary greatly across the country and, even if local authorities do not reach their targets, they can keep 80% of the fees collected.

In Wales, local authorities have statutory recycling targets. As we all know, Wales has one of the highest recycling rates in the world. Wales is on our doorstep, so why are the same targets not being implemented in England? What we have with this SI is a packaging tax with no prospect of improved recycling in its outcomes.

I am conscious that local authorities are chronically underfunded. The move to EPR will boost their coffers but, with no KPIs on recycling linked to the fees received, this money will not necessarily be used to improve kerb-side collections but might go into the social care budget desert. Can the Minister comment on this?

Under the previous Government, a second pEPR consultation included a proposal to include in pEPR legislation the mandatory retailer take-back of paper cups. This followed major investment by the major coffee shop brands, which provided facilities for the public to return used paper cups to their premises and to those of their competitors. The cups were then sent to facilities, such as James Cropper, to be recycled.

Between their consultation response and the publication of the SI, the previous Government announced that only premises employing 10 or more full-time equivalent employees would be mandated to take back cups. That announcement served to confirm that the take-back scheme would go ahead, with a timetable for inclusion in this SI. The industry received a shock when the SI did not include paper cup take-back. No announcement or statement was made by Defra on this. The whole point of cup take-back was to set a precedent for packaging that would not normally be disposed of in domestic bins. In early discussions, Defra raised the possibility of similar schemes for confectionery and snack packaging. As there is no ability to amend any SI, I would be grateful if the Minister could meet with me to consider how the paper cup take-back scheme could make the progress expected by the industry.

The Secondary Legislation Scrutiny Committee report clarifies how the Environment Agency is funded and gives assurances that the increased charges will provide additional funding to reflect the new duties. However, after years of decreasing funding for the EA, there is concern that the increase will be insufficient to support the enforcement and auditing of this scheme. Can the Minister give reassurance on this?

Finally, although I welcome the SI, I am concerned by the missed opportunities. Having carefully considered the option of a fatal Motion, I decided that, despite its omissions, the country needed to get on with reducing waste, and the SI is a vital part of achieving that. As we are currently unable to amend SIs, it would be a blockage to progress.

I have asked the Minister a lot of questions. If she is unable to provide answers this afternoon, perhaps she would agree to meet to discuss this important matter, about which I readily admit to having something of a bee in my bonnet.

[Lord Blencathra (Con)]

My Lords, I too thank the Government for bringing these regulations to the Committee for debate. I think all noble Lords agree that reducing the impact of pollution by waste on our environment is an important goal. These Benches wholeheartedly support that objective and we want the Government to foster innovation in the packaging sector that drives down the harms of pollution.

We all agree that recycling rates are too low in both domestic and trade scenarios. Domestic recycling is not helped by councils operating dozens of different schemes. Standardisation is essential, but these regulations impose huge bureaucratic burdens on the regulator and the industry to the very tight timescale of April 2025. As we all know, the Environment Agency is hard pushed to deliver on all its current commitments, including on flooding, and it will have massive new responsibilities under these regulations. Just look at the information which has to be sent to the EA for registration and at all the six-monthly reports that it will now have to plough through.

Here is my first question for the Minister. I should say that I, too, have a number of questions, some of which are technical; I would be happy for the Minister to write to me, as I do not expect her to be able to come up with, off the top of the head, the answers from around 500 pages of regulations. What estimate has been made of the extra staff required by the EA and what funding will be available to it? The Minister said that £1 billion will go to local authorities for their expenses, so who will pay the EA for its additional burden? If local authorities are to get an extra £1 billion, I hope that the Government will clamp down ruthlessly on this nonsense where some councils want to collect garbage—I apologise for that awful American word—and rubbish such as dirty nappies and rotten food only once a month. That is simply not acceptable; I hope that the Government will clamp down on it and stop it.

I hope that the Government will also stop councils charging for the collection of garden waste. Garden waste such as grass clippings is recyclable. There should not be a charge for that.

Then we have the cost to businesses. Many have expressed concerns with the illustrative figures suggested by Defra since most producers think that the fees will be at the top end of the illustration. For example, Defra has, I believe, suggested that the illustrative fees for glass will be between £115 and £215 per tonne. How can businesses plan on that basis, with such a wide variation, while also adding the planned increases in national insurance and business rates? This is not freeing up business to go for growth, as the Chancellor claims. I understand that, in October, 85 industry businesses signed a joint letter to the Minister, Mary Creagh, calling for the scheme to be delayed. They are not opposed to extended producer responsibility but they want to know what fees will be charged—and in good time, so that they have more time to register with the Environment Agency.

Wines and spirits member companies account for 70% of the glass used in the drinks business. They have 300 member companies and more than 60% of them are small and medium-sized enterprises. They also want to see the scheme delayed for a year, in order to sort out not just the fee structure but the definitions of “non-household waste” and “packaging designed for business use”. They say that the vast majority of waste generated in the hospitality sector is disposed of via business waste streams, which they pay for, but they will also incur EPR fees so will pay twice. Defra had promised to avoid this double counting, I believe, but it has now decided to press on with these regulations regardless, and the double counting is included. Why? Can the Minister justify this unfairness? The Wine and Spirit Trade Association says

“that all packaging sold to the hospitality sector or on-trade operators should be classed as non-household and exempted from additional EPR fees”.

Again, I would like to hear the Government’s explanation on that in due course; the Minister may write to me.

Paper and card are major recycling commodities. I understand that approximately 50% of business waste is made up of paper and card. It is important, therefore, that the regulations work—and work well—for the paper recycling industry. The Confederation of Paper Industries has a number of concerns about the

“proposed policy, particularly in the context of the … Recyclability Assessment Methodology (RAM) and the illustrative base fees”.

With regards to the RAM, it is concerned that

“the thresholds for non-paper components in the paper and card category are high and not aligned with industry standards. This methodology will lead to high levels of contaminants, potentially increasing plastic waste, reduce the quality of recyclate, and limit opportunities for innovation and sustainable packaging design. They create barriers for the recycling industry and risk undermining the recycling process”.

I simply ask: is it right about that? I do not know, but I think that we deserve an answer.

Another of the CPI’s key concerns relates to the proposed fee structure. It says that

“the structure creates a cost advantage to choosing plastic due to its lightweight nature, which risks driving material shifts from paper to less sustainable, fossil fuel-based plastics, and disproportionately affects the competitiveness of paper and board packaging”.

This concern is similar to the one raised by the noble Baroness, Lady Bakewell, when she was talking about the difference between glass and plastic.

Further, the paper industry is concerned about

“the inflationary effect of the fee structure due to higher per-unit costs; aside from these costs being passed onto consumers, it could also see the UK’s competitiveness reduced, potentially leading to disinvestment in domestic production”.

Again, I do not know whether that is right. I hope the Government can explain whether the industry is right to be concerned about that or whether it has the wrong end of the stick.

14:15

The CPI also says that the

“Simpler Recycling proposals do not give sufficient prominence to improving the quality of paper for recycling, with unmanaged commingling risking damaging the quality of recyclate collected, ultimately driving up reprocessing costs for industry and leading to consumer confusion. Whilst we agree with the ambition to mandate collections on certain materials, in order to meet recycling targets and achieve a more efficient, zero-waste circular economy, we need a system that will act to drive up the quality and quantity of recyclable materials. Moreover, the proposals seem not to address the current issues with the quality of materials produced from commingled recycling via Material Recovery Facilities (MRFs), offering no prospect for reprocessors that contamination rates will improve”.

I must confess that I am quoting exactly from the CPI briefing letter on that; I have no idea exactly what it means, but it sounds a serious question for the Government to answer in due course. These are serious concerns from an industry that says it is responsible for 50% of the material recycled in this country. It too supports the EPR but wants changes to the regulations, as I have outlined.

We have some concerns that this is a very large set of regulations. It has 140 regulations and 17 schedules, making it larger than many other instruments. In fact, rather than going to the gym to improve my arm muscles, I have been using the regulations as a substitute. The first 22 regulations contain all the definitions used in the instrument; that is fairly massive. Of course, they apply to hundreds of thousands of businesses operating in many different ways, and they cover the seven defined materials used for recycling, as well as “other materials”, whatever they may be.

Does the Minister agree that instruments of this size present a challenge to the House in that we are limited in the amount of scrutiny we are able to undertake on secondary legislation, and that, with the best will in the world and even with brilliant all-seeing Defra civil servants and clever parliamentary drafters, not to mention a caring and able Minister, there will inevitably be many errors and unforeseen circumstances in these regulations? Will she promise not just to keep the regulations under review but to come back to the House as soon as possible when glitches have been discovered? I will not criticise her or Defra if she says, “This bit or that bit ain’t working the way we thought”, or “We need to change something”. There is no shame in that for something this complex and innovative. The shame would be in discovering flaws and not correcting them.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank noble Lords for their valuable contributions to the debate. There has been an enormous amount of questions, which I will do my best to cover but I may well end up writing in response to some of them. As the noble Lord, Lord Blencathra, said, it is a large document, although, having worked on the Levelling-up and Regeneration Bill, which I needed a wheelbarrow to get around the House, nothing ever seems large to me again. I will try to cover as many questions as I can but, if noble Lords will bear with me, I will go through Hansard and pick up anything that I miss.

The noble Baroness, Lady McIntosh of Pickering, asked a number of questions about household waste. The UK household recycling rate was 45% in 2021, with no substantial change since 2015. However, there is a lack of robust data on contamination rates, so I cannot provide any detail on that. We have used assumed contamination rates, which have been informed by data from sector experts, for the impact assessments for collection and packaging reforms.

The noble Baroness also asked about incentives or targets for reuse as well as recycling. Under pEPR, there are already incentives to support the adoption of reusable packaging. Producers are obligated only once for a piece of packaging, not for each time it is collected and reused. Additionally, where reusable items are collected for recycling by businesses, these can be offset against their overall pEPR obligations. We think that this exemption, in combination with the offsetting provisions, incentivises a move to reuse and drives a move away from single-use packaging, but we will continue to review the effectiveness of these measures to ensure that they are sufficient to meet the UK’s ambitions to increase the reuse of packaging.

The noble Baroness, Lady Bakewell, asked about enforcement and compliance. The pEPR regulations set effective and proportionate enforcement powers to achieve high levels of compliance. We have worked closely with the environmental regulators to ensure that the fees payable to them are adequate to fund the full regulatory service. One such power is the ability to issue variable monetary penalties in respect of certain offences, including the failure to register and the failure to report data. These new variable monetary penalties will enable the environmental regulators to issue financial penalties that are commensurate with the nature of the offence and the size of the business, meaning that larger businesses may face significant financial consequences for failing to comply with the regulations.

Additionally, the scheme administrator that will be created by the SI will be granted the use of civil sanctions, including variable monetary penalties, to address the non-payment of disposal fees. Where a producer fails to pay its disposal fees in the prescribed time, the scheme administrator may issue a variable monetary penalty, the amount of which will be equal to 20% of the unpaid disposal fees or up to 5% of the business’s annual turnover, whichever amount is higher. The noble Lord, Lord Blencathra, asked for more detail around the fees that would be charged.

The noble Baroness also asked about the appointment of the scheme administrator. The scheme administrator will be hosted in Defra and will report to the four Ministers of the four nations. There will be a governance structure that will include representatives from the value chain—in other words, producers and local authorities.

On the deposit return scheme, which was mentioned by a number of noble Lords, we are completely committed to launching DRS in October 2027 in England, Northern Ireland and Scotland; we laid the regulations for England and Northern Ireland on Monday. The Scottish Government are making the necessary amendments to legislation in Scotland, thereby enabling us to progress the appointment of the deposit management organisations in April next year.

Materials, the glass sector and plastics were all mentioned. I am sure noble Lords have read that in England, Northern Ireland and Scotland, glass will not be part of the DRS scheme. The Government’s position is that glass would add considerable upfront cost and create complex challenges to the delivery of DRS, particularly for the hospitality and retail sectors—as mentioned by the noble Lord, Lord Blencathra—as well as disproportionately impacting small breweries and being inconvenient for customers.

Glass drinks bottles will instead be part of pEPR. We have been engaging with industry as part of the development of our illustrative base fees, and further engagement is planned over the coming months. To ensure that heavier materials such as glass are not disadvantaged in our model, where weight is not a limiting factor, costs are apportioned according to the volume of collected material rather than the weight. PEPR provides a strong incentive to move towards reuse, to which the glass sector is well placed to respond. Given the carbon intensity of glass recycling and its durable nature, reuse is the goal. PEPR will incentivise the reuse of glass, as fees will be charged only the first time a product is placed on the market and producers will be able to offset what they recycle.

Regarding the Welsh aspect of this, the UK Government, the Department of Agriculture, Environment and Rural Affairs—DAERA—in Northern Ireland and the Scottish Government are not including glass, as I said, but the timing and the scope of the Welsh DRS scheme have not yet been confirmed. While this remains the case, there is no justification for extending the temporary pEPR disposal fee exemption on plastic and aluminium drinks containers to include glass. We will continue to work closely with the Welsh Government; once we have finally confirmed the details of their scheme, we will consider whether any amendments to the EPR regulations are needed.

I think it was the noble Baroness, Lady McIntosh, who asked whether material switching would happen because of this. Decisions on the use of packaging materials are complex and driven by a range of individual, business and market factors. At the moment, we have no robust evidence that switching would occur. As part of our illustrative base fees webinar on 3 October, we requested that the industry provide detailed evidence to support its claim; we also talked to other government departments. We have not yet received any substantial evidence. Having said that, we are planning further engagement with different sectors in December to discuss any findings and their implications. As part of this continuous engagement, we will aim to share as much detail as possible relating to pEPR fee calculations at these sector-specific round tables.

I was asked about the evidence that will be required from producers to show that packaging waste they have collected has been recycled. The regulator would not usually stipulate specific documents in relation to this requirement but would provide examples and principles acknowledging that every producer is different and may therefore have access to different evidence. A producer could obtain written confirmation from their reprocessor outlining what percentage of the materials that were collected and sent for recycling was actually recycled, but this would need to outline the reprocessing method to determine this value and the EA could expect the producer to have a documented process in place to validate this data. So it is quite complex.

The noble Baroness, Lady Bakewell, asked about single-use cups, including whether we are still committed to introducing the mandatory cup take-back scheme; I think she referred to that. We very much welcome the efforts of UK producers to lead the way on the take-back of single-use cups through voluntary initiatives, such as the National Cup Recycling Scheme. The collection and recycling of fibre-based composite cups is eligible for offsetting against pEPR fees. The Government recognise the urgent need to limit the environmental impact of single-use packaging, including fibre-based composite cups, and are considering the most effective ways to meet this challenge. I am more than happy to meet the noble Baroness to discuss this further, if she wishes.

The noble Baroness also asked about targets, PERNs and what is happening to deal with fraud in the system. The new regulations will increase the volume and frequency of data reported by packaging reprocessors and exporters to enable greater transparency right through the system. The regulations include new conditions of accreditation, and regulator fees will also increase to fund additional compliance monitoring of operators. As I mentioned earlier, there are also new civil sanctions to address non-compliance, including the ability to issue uncapped penalties.

Local authorities were mentioned by a number of noble Lords. In November, local authority chief executives were sent indicative estimates of their year 1 extended producer responsibility for packaging payment. Those estimates will cover the April 2025 to March 2026 financial year, so they will have some idea of the costs. The first payments for EPR packaging will be made by November 2025. I hope that that is helpful.

The noble Lord, Lord Blencathra, raised a number of issues around business and costs. The figures that were widely quoted in the press that it would cost industry £2 billion a year are inaccurate. Our estimate shows that the reforms will cost around £1.4 billion a year. This amount will cover local authority costs to manage household packaging waste, as well as scheme administrator costs. Individual producers will be able to reduce their bill by placing less packaging on the market—that is what the legislation is designed to do. Further, any smaller businesses are likely to be excluded due to the de minimis threshold, although it is assumed that the majority of producers will be liable. Hence, the fees will largely represent an industry-wide cost increase, with all firms facing a small increase in cost. For the average producer, cost increases due to pEPR are less than 1% of total revenue.

14:30

The noble Lord asked how businesses can plan without more certainty. The publication of the illustrative base fees will provide clarity for industry as it prepares for the introduction of pEPR. We believe this will allow businesses to plan for scenarios within the published fee range estimates. The Government released a second iteration of illustrative pEPR-based fees on 30 September. That was calculated using an updated methodology based on producer-reported tonnages from 2023, alongside Defra-modelled local authority costs. This is the same underlying approach that the scheme administrator intends to use for the final fees from 2025.

We are aware of producers’ need for certainty on base fees in order to best support them to prepare for this new regime. We have always been committed to providing this after April 2025, when we have a full year’s data from 2024-25. We are still committed to improving clarity and certainty on base fees as soon as possible and are continuing to look for options in order to achieve this.

I think the noble Lord, Lord Blencathra, raised the cost of the UK’s fees compared with other places. Comparisons are not straightforward, because of differences in waste infrastructure and waste management. For example, fees may be lower in countries with well-established DRS schemes or in countries that rely more heavily on “bring sites”, where consumers bring their waste rather than relying on having it collected from their homes. That, of course, reduces costs.

It is also important to point out that UK fees may be higher because of the full inclusion of the costs of managing waste not being disposed of by consumers in recycling bills, something which other countries do not cover fully through their pEPR schemes. Furthermore, some countries’ fees are designed to recoup only a proportion of the costs of collection and recovery and all associated costs, while the UK’s are designed to recoup 100% of costs in order to have an efficient and effective system. We will continue to work closely with businesses on the implementation of this programme.

Finally, I think the noble Lord, Lord Blencathra, asked about the definition of household packaging from the wine and hospitality sector. We are continuing to listen to those affected by these provisions. The views we have heard highlight the difficulty for many producers in differentiating between household and non-household packaging, as the same product may be supplied to both business and household customers, although often through wholesalers that have the same product that can be used by both. We acknowledge that the needs of all sectors must be taken into account in these regulations, but also that one size fits all is, of course, not possible. So alongside the first iteration of the scheme being delivered, work has also begun with industry stakeholders to explore its future improvement. This will include assessment of how the household definition could be refined to capture fewer items of packaging disposed of by business.

I hope I have covered most of the questions raised by Members.

[Baroness McIntosh of Pickering (Con)]

I had one quick question about the policy on energy from waste. Obviously, if the Minister needs to write to me on it, I would be very grateful. Also, the regulations clearly state that aims should be achieved around reduction and reuse, but at the moment, the regulations address recycling only. Any thoughts on that in writing would be very helpful.

[Baroness Hayman of Ullock (Lab)]

The fact that there are incentives for producers to reuse is part of the purpose. It is about not just about recycling, but about changing behaviour to encourage producers to have packaging that can be reused. I hope that is the answer to that. I will write to the noble Baroness on energy from waste.

[Lord Blencathra (Con)]

Will the Minister write to me on the technical points made by the Confederation of Paper Industries? I think we would all like to see that response.

[Baroness Hayman of Ullock (Lab)]

Absolutely. As I say, we have had quite a long debate with a lot of questions, so I assure noble Lords that we will go through Hansard and write with detailed responses on any outstanding questions.

This legislation is necessary to initiate the circular economy for packaging in the UK, ensuring that materials and products are kept in use for longer. I trust that noble Lords understand and accept the need for this instrument; I very much welcome their broad support.

Motion agreed.