Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2024

Monday 20th January 2025 Grand Committee

Considered in Grand Committee

16:51

Moved by

[Baroness Hayman of Ullock]

That the Grand Committee do consider the Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2024.

Relevant document: 11th 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, the Government are committed to transitioning the UK to a circular economy. We want to finally move away from the linear “take, make, throw” model, which we know causes harm to our environment and our society, and towards an economy that keeps our valuable resources in use for longer. A deposit return scheme for drinks containers is a strong example of the circular economy in action. It is a critical first step.

Deposit return schemes are a well-established and proven method and over 50 schemes are already in place, including in Germany, Sweden and the Republic of Ireland. A DRS incentivises consumers to return and recycle their drinks containers and means that valuable materials are collected, recycled and made back into new drinks containers—a truly circular loop.

The deposit return scheme is one of the three core pillars of the packaging reforms, alongside the extended producer responsibility for packaging and the simpler recycling programme for England. Together, it is estimated that these packaging reforms will support 21,000 jobs in our nations and regions and help stimulate more than £10 billion of investment in recycling capability over the next decade. They are also estimated to deliver carbon savings of over 46 million tonnes of carbon dioxide equivalent by 2035—valued at more than £10 billion in carbon benefits.

At its heart, the deposit return scheme is a key environmental policy that will tackle the scourge of littered drinks containers, protect our beaches and countryside, preserve our wildlife and restore pride in our local communities. The benefits of the DRS in reducing littering cannot be overstated. Each year in the UK, approximately 4 billion plastic bottles and 2.5 billion metal drinks containers are not recycled. Instead, they are disposed of in general waste or littered.

We are all familiar with the destructive impact of litter. In recent years, we have seen littered drinks containers blight our marine environment, but it does not stop there. According to a recent report from Keep Britain Tidy, littered drinks bottles and cans along our roadsides are killing millions of our native mammals every year. This is devastating our rarest and most important small mammals such as shrews, bank voles and wood mice. We must act to protect our natural environment.

A deposit return scheme established under this instrument will also promote a fairer society. Obligations will be placed on drinks producers to ensure that containers are collected and recycled. This is consistent with the well-established “polluter pays” principle. We have set an ambitious target for the scheme to collect 90% of in-scope containers by the third year of operation.

Laid in draft before the House on 25 November 2024, this instrument establishes, in England and Northern Ireland, a deposit return scheme for drinks containers. Under a deposit return scheme, a person who is supplied with a drink in a container that is in scope of the instrument pays a deposit that can be redeemed when it is returned for recycling. The scheme design in this instrument is informed by well-established international examples and extensive industry experience. Many of our industry partners have shared their experiences delivering these schemes across the world. The scheme will be centrally managed by an industry-led, not-for-profit organisation called the deposit management organisation.

This instrument applies to England and Northern Ireland, but my officials have worked closely with the Scottish Government, who are amending their existing legislation to launch simultaneously across England, Northern Ireland and Scotland in October 2027. The Welsh Government have withdrawn from the four-nation DRS approach. However, we remain in close working partnership with them as they make decisions regarding a DRS in Wales. We are keen to keep the door open to provide as much interoperability of schemes across the UK as possible.

Before I turn to the detail of the instrument, I acknowledge the work of the Secondary Legislation Scrutiny Committee, which draws this instrument to the special attention of the House on the grounds that it is politically or legally important and gives rise to issues of public policy likely to be of interest to the House. The committee highlighted questions on the scheme’s application in Scotland and Wales; the exclusion of glass; the deposit level; interactions with the extended producer responsibility for packaging scheme; and the set-up of the deposit management organisation. The committee also highlighted correspondence received from the Wildlife and Countryside Link, which is supportive of the legislation in principle but raised questions about ensuring a comprehensive return point network; the exclusion of glass; monitoring and review mechanisms; and enabling reuse.

I now draw Members’ attention to the obligations introduced by this instrument. It sets out the scope of the scheme and places obligations on drinks producers, importers and retailers. Producers of drinks in plastic and metal containers from 150 millilitres to 3 litres will be obliged to label products and charge a deposit when supplying the drink into England and Northern Ireland. They must also pay the deposit to the deposit management organisation, along with the producer fees to fund the scheme. Retailers across England and Northern Ireland will be obliged to participate in the scheme by charging a deposit on plastic and metal drinks containers then taking the containers back and refunding the deposit. They are also required to pass the collected containers to the deposit management organisation for recycling and to display information to consumers so that they understand how the scheme works. These obligations on producers and retailers across England and Northern Ireland will start from October 2027, when the scheme is launched.

To administer the scheme, this instrument requires the appointment of the deposit management organisation. It allows for certain provisions to come into force on the day after the instrument is made. These are necessary for the appointment of the deposit management organisation and the establishment of the administrative arrangements in advance of the scheme launching. The deposit management organisation, which will be appointed in April 2025, will be obliged to meet collection targets, pay return point operators for collecting the containers, recycle the collected containers and pay national enforcement authorities.

The instrument provides powers for the deposit management organisation to set deposit levels, prescribe labelling, interact with other schemes, set producer fees, calculate handling fees for return points and exempt some retailers from hosting a return point. Under the “polluter pays” principle, it is the responsibility of businesses to bear the costs of managing the packaging that they place on the market. Through specific return point exemptions based on store size, proximity to another return point and suitable premises grounds, this instrument also protects small businesses across England and Northern Ireland, which are vital to our high streets and are the backbone of our economy.

Finally, this instrument makes provision for monitoring and enforcement activities by the Environment Agency and local authority trading standards to ensure that mandated businesses and the deposit management organisation are compliant.

In conclusion, the need for a deposit return scheme is plain to see. This scheme will not only improve recycling rates and provide better-quality material for recycling but make a difference to people’s daily lives. It will encourage people to see waste as a valuable resource and, by reducing litter, it will improve local communities. With this scheme, we can turn back the plastic tide. I beg to move.

17:00

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank the Minister for introducing the instrument before us. I support its contents but I want to clarify a couple of issues.

Can the Minister clarify the situation in Wales? I understand her to say that the scheme will not be offered in Wales and that the Government are no longer engaging with Wales. Do they have a commitment from Wales? I just want to clarify that because, obviously, the situation in Scotland is welcome.

I am grateful to both Coca-Cola and the Food and Drink Federation for their briefings and preparation for today; I am an officer of the All-Party Parliamentary Group for Food and Drink, which is why I asked them for a briefing. They welcome the concept but, in their view, it is important that it is rolled out across the United Kingdom.

The Minister referred to other jurisdictions. I am familiar with how the scheme operates in Denmark; it has had rather perverse consequences. I sometimes feel as though I could pay for my whole Danish holiday if I went around collecting all the bottles and cans left after picnics in parks across Copenhagen and took them back. The deposit—it is called Pant—is actually set at quite a high level, so it would be helpful to know what level the Minister and the Government have in mind. Obviously, it has to be set at a level that is affordable for the consumer, ensuring that they are willing to go back and return a container to the place where it was bought.

Obviously, we must have a deposit management organisation on side. Who will be the deposit management organisation in England? Will it be the supermarket? As consumers, we are concerned about the impact this will have on small convenience stores, which will perhaps not have the facilities to take these returned bottles or whatever after use. It would be helpful to have clarification on what the costs will be and who will provide the service, because they are going to require a very large facility to accommodate the containers being returned.

Coca-Cola is keen to see the DRS—the deposit return scheme—considered as part of the extended producer responsibility. Is that something the Minister can confirm this afternoon?

The Minister concluded by saying that the monitoring and enforcement will be done by, among others, trading standards and local authorities. Are the Government convinced that they will have the resources to do this? Obviously, it is an additional responsibility over and above what they are currently doing in relation to food standards and other commitments.

Finally, if glass is to be excluded at this time, when do the Government envisage glass being included? As I understand it, glass is included in most other jurisdictions, so a big chunk of deposit returns will be excluded if glass is not included.

With those few queries, I lend my support to the scheme.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for presenting the case for the deposit return scheme. I declare my interest as a member of the Secondary Legislation Scrutiny Committee in your Lordships’ House. I welcome this SI and agree with my noble friend that it will make a major contribution to the reduction of littering. Numerous cans and other types of litter are strewn across the countryside and nobody appears to take responsibility, apart from local neighbourhoods that engage in their own collection schemes. I laud them for doing so.

I have some questions in relation to Northern Ireland. Normally this would be a devolved measure. I suppose that the UK Government were trying to ensure that there was a collective approach on the part of the Government and the devolved nations and regions. Perhaps my noble friend could explain the purpose of including the devolved nations and regions. Also, will the money collected from this scheme in Northern Ireland go to the Treasury, or will it go to the Department of Finance, where it can be invested in local schemes, and into the general exchequer for the delivery of lots of different types of service? I am well aware of the value of the plastic bag scheme in reducing litter but also in terms of the money. It has added to the portfolio of money available for the enhancement of services.

Secondly, I have a couple of questions in relation to Wales, which, I note, has not signed up to this scheme. How can the interoperability of the four UK schemes and the avoidance of unique identifiers in the Welsh market be assured? With Welsh proposals not yet published, how can the October 2027 introduction date be assured to avoid material switching under the EPR scheme? Will the Government ensure that the divergence of the Welsh scheme does not impact the governance of the UK, Northern Ireland and Scotland deposit return scheme and the appointment of a scheme administrator?

Those are the issues that most interest me in this SI, which I strongly support.

[Lord Hayward (Con)]

My Lords, I echo the comments made by the two previous contributors on compliance for small businesses, which is crucial. It is all very well for large companies to say, “Yes, we support these schemes”, but the burden will often fall heavily on the small retailer, in one form or another. I should start with a mea culpa, in that I was head of personnel for Coca-Cola when it introduced the first ever plastic bottles into this country, so it is all my fault. For the benefit of my noble friend next to me, in particular, the first plastic bottles produced in this country were made in a factory in Leeds—a bottling plant in Pudsey.

I therefore also have a memory of glass bottles and the system that worked then. The glass bottle return system had gone out of operation in most parts of the country when plastic bottles were introduced. At the risk of being accused of regionalism or being rude about the Scots, that system lasted longer in Scotland because that part of the country returned their products to the retailers to reclaim the deposits available.

[Lord Blencathra (Con)]

A thruppenny bit.

[Lord Hayward (Con)]

It is important to small businesses and, because we are talking about companies that operate worldwide, both producers and retailers. How closely will our system meet that of the other countries that the Minister identified? I am aware that there are negotiations in other parts of Europe on some form of return system; it would clearly be better for all concerned if there is either a common or a virtually common system. That is particularly the case for Northern Ireland versus Eire, as many of the products will move from one side of the border to the other.

My concerns are about why glass is excluded, the international basis of the operation and its similarity with others, and small businesses that will carry a burden in one form or another. Given the experiences that I witnessed in my previous role for many years—I should add that I later went on to become head of the British Soft Drinks Association, and therefore saw operations not only from Coca-Cola’s side but for waters and fruit juices—it is important that this works across the whole country. I recognise and expect that the returns will operate much better in some places than in others.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for her introduction to this statutory instrument. It is vital to ensure that, as a country, we reduce our waste and engage the consumer fully in the process. As the Explanatory Memorandum clearly states, the power to introduce a DRS was enshrined in the Environment Act 2021, nearly four years ago, but the issue was being debated as early as 2019, with Defra running two public consultations. The first gave 84% support from those participating; the second, 83%, so why has it taken so long to get to this position? I do not wish to be impolite to the Minister, as she has been in post for only a short time, but it has to be said that there was a lot of pratting about by the previous Government. This is, of course, a technical term.

The scheme is to be run by a direct management organisation—a DMO—and this will take another two and a half years to get up and running, so will not start until October 2027. They say that Rome was not built in a day, but I despair at the leisurely timeframe. Meanwhile, the country is knee-deep in waste.

I welcome the application of civil penalties to drinks producers that do not comply, but it would make a big difference if civil penalties were applied to individual consumers who carelessly discard their drinks containers around the countryside. I am not convinced that the carrot of a returned deposit will alone change behaviour; there needs to be a stick element as well.

Despite a not-for-profit DMO being set up to administer the scheme, local authority trading standards departments will be involved in monitoring and enforcement, along with the Environment Agency. As the Minister knows, local authorities are underfunded, with social care swallowing their budgets at an alarming rate. Do the Government intend to produce additional funding for local authorities trading standards to carry out this not inconsiderable extra work?

Despite the Explanatory Memorandum referring to the instrument enacting the “polluter pays” principle from the Environment Act, I can hardly be excited about the fact that it has taken so long to reach this point, as 2021 has disappeared over the horizon. The first Defra consultation was in February 2019, six years ago. That first consultation response was published within four months. The next consultation in March 2021 was not published until January 2023, nearly 18 months after it closed. The responses showed that 83% of respondents were in favour of a DRS. Was Defra waiting for a 100% response before it acted?

17:15

Paragraph 7.6 of the EM gives details of how Defra has been raising the profile of the impending scheme. The industry cannot claim that it did not have enough time to get ready for implementation. Paragraph 8 of the EM states:

“Guidance may be published by Defra”.

Surely to goodness, with the amount of time that has elapsed and the amount of consultation that has gone on, the industry must be ready by now to engage with the scheme and understand which way is up. Paragraph 9.3 states:

“The legislation does impact small or micro businesses”,

as the noble Lord, Lord Hayward, said. If the scheme is to be effective, which it must be, it should affect everybody—not just businesses.

After the extended period of negotiation and discussion between the devolved authorities, Wales has decided to proceed alone and include glass in its DRS. The previous Conservative Government decided that, due to the internal market Act of 2020, they would exclude glass. I have sympathy with Wales and feel that it is a lost opportunity, bordering on negligence, not to include glass. However, to give as an excuse that there was insufficient time available to include glass is derisory. Scotland has already installed its DRS machines and equipment, but it is lying idle, waiting for the Government to make their mind up about what they want to do.

The decision of Wales to continue alone is causing some concerns within the industry, which does not believe that a seamless scheme can progress if Wales is not included. I share those concerns but am more concerned that glass has been excluded from the scheme that will operate in England, Scotland and Northern Ireland. This is difficult to understand, given that glass was one of the first household items to be considered for recycling and that consumers embraced this concept from the beginning.

The Wine and Spirit Trade Association feels that the inoperability of the four UK schemes, and the avoidance of unique identifiers in the Welsh market, will be difficult to assure. First, it says:

“For any Deposit and Return Scheme … to be fully effective it must be aligned fully across the four UK nations … Including introduction date, materials in-scope, reporting obligations, any exemptions (and thresholds), and labelling requirements”.

Secondly, it says:

“The exit of Wales from joint schemes in England, Scotland and Northern Ireland not only undermines the interoperability of the scheme but also undermines the effective operation of the UK’s internal market. Unique identifiers for the Welsh market must be avoided. The UK Government must urgently confirm whether a UK Internal Market Act exemption is under consideration for Welsh DRS”.

Finally, it says:

“DRS must not be delayed beyond the current launch date of October 2027 across all UK nations”.

I concur completely with the Wine and Spirit Trade Association’s last statement. On these Benches we are not prepared to see the scheme’s start date postponed. However, a solution must be sought. The public have waited far too long, as a result of the previous Government’s delay on this issue. Why should they have to wait any longer? This scheme must progress, and quickly; even October 2027 is too far away.

The Secondary Legislation Scrutiny Committee report on this matter makes it clear that there need to be reciprocal return arrangements across the country. Other countries manage to operate deposit schemes for glass, so why is it so difficult for us here in the UK? If the Government are determined that glass should be part of the extended producer responsibility scheme, they will have done research on what percentage of glass is likely to be recycled under EPR, as opposed to the DRS. Reliable examples of the percentages of DRS will be available from those European countries that already operate glass DRS. Defra’s response to the Secondary Legislation Scrutiny Committee indicates:

“If by January 2028 there is no DRS in place in the UK, these materials will become obligated under pEPR”.

That gives a strong impression that Defra is aware that the DRS is not going to work.

I am extremely frustrated that we as a country cannot get our act together over collecting the waste arising from our drinks industry. I support this SI, but I am looking to the Minister to provide reassurance that it is going to work and be operating in the shortest possible time, and by October 2027 at the latest.

[Lord Blencathra (Con)]

My Lords, I begin by commiserating with the Minister on the enormous amount of work she has to handle in this House. The Commons have four Ministers carving up the legislation between them, but the noble Baroness has to do the whole shooting match on her own—to use an unwoke term, probably. Last Monday we were into the details of free-range egg definitions in this Room, while on Thursday it was just a simple little thing like saving the world from destruction. Today it is one of the most difficult and complex instruments we have seen for some time, with 108 regulations and seven schedules—97 pages of controversial detail. In the last debate I heard my noble friend Lord Lilley complain that the heat pumps regulations ran to 32 pages—he should be so lucky.

If I were to comment on or ask questions on every section and subsection that concerns me, it would be an hour-long speech—I will not do that to the Minister or the Committee. Even so, I still have a lot to ask, but I have notified the Minister about my questions since clarity is more important today than trying to put one over on the Minister. I am a recycling enthusiast but not a fanatic, and I hope I am realistic. When I heard my noble friend Lord Hayward talk about the Scottish experience, I interjected to say “A thruppenny bit”, because I recall that if, as a 10 year-old boy in the Highlands in the early 1960s, you collected the glass lemonade bottles with their bakelite screw-on tops, you could get a thruppenny bit back every time. I had a nice little business going collecting those bottles, although admittedly some of them were probably not capable of being refilled. In the terms of the current legislation, they were a bit soiled. But it was a good little business—and I am probably the only person in this Room who did recycling at that age and at that time.

[Lord Hayward (Con)]

I am afraid that my noble friend is showing his age, because the deposit went from a thruppenny bit to 6p and then to a shilling—so to be able to recall the thruppenny bit collections displays an age that I am not sure he wishes to do.

[Lord Blencathra (Con)]

Because I had engaged some others to help with collecting the bottles, to whom I paid 1.5p while I took the thruppenny bit, I was put out of business prematurely before I could collect the 6p.

The last Government started this in 2019 with their first consultation, and there have been two more since, as well as various workshops and draft regulations like these. The fact that we did not lay those regs for approval was not through lack of belief in recycling but because there were still far too many loose ends to tie up. I am one of the 84% of consumers who like the concept of this, but I am deeply worried about the detail—just like the Secondary Legislation Scrutiny Committee. We saw the Scottish SNP Government, with their usual fanatical incompetence, rush into this then have to pull back. My principal concern is that this may be one more recycling initiative too far at the moment.

First, we have just done the EPR, which will force all manufacturers of glass, plastic, cans, paper and cardboard to do more recycling. Then, on 3 February, we are due to have the regs on consumer recycling, whereby we will allow all cans, glass and plastic to go into one bin, which will boost recycling. I am totally in favour of that, as long as paper and card are kept clean and pure in a separate bin. In March, the commercial simpler recycling scheme will come in, which will boost commercial recycling. With all that going on, why do we need a scheme to take back empty drinks containers to the shops when it is easier and cheaper to do it at home? It is not just me who is concerned. WRAP said in its response that it is difficult to understand the full impact of deposit return schemes on local authorities before they go live and before adaptations to the EPR and simpler recycling are known.

The Explanatory Memorandum says that we looked at foreign deposit return schemes, and the enthusiasts all cite Germany, which has a phenomenal 98% return rate for its DRS. That is fantastic, but let us look at the German history of this. Germany started a refillable bottle scheme in the 1950s, then had initial legislation on recycling in 1991 and gave a big boost to it in 1996. In 2003, it introduced yet more legislation to introduce DRS for single-use containers and there was a big change in 2006 when it legislated to make all retail outlets take back other shops’ bottles. That encouraged deposit return schemes to take off. One year later, the German company TOMRA sold over 9,000 reverse vending machines, of which 25% of return locations in Germany have one. Incidentally, TOMRA was created way back in 1972 to handle refillable bottles.

Germany is still tweaking it. Only in 2022 did it bring in a DRS for alcoholic drinks, juices and nectars in single-use plastic bottles and cans, as well as milk-based drinks in cans. I can only assume, to borrow the words of the noble Baroness, Lady Bakewell, that the Germans were faffing around for the last 50 years before coming to the present scheme. They have been at it a long time, slowly adding to the legislation as experience, technology and acceptance grew. Their success has depended on three things: first, 42% of all beverages in Germany are filled in refillable containers, and they get a 98% return rate on that; secondly, they have over the years built 135,000 return locations; and the third aspect is the German mentality. That is not a jibe at an alleged Teutonic tendency that orders will be obeyed but comes from the fact that the Germans have been doing this deposit return scheme for about 50 years. It is their modus operandi, and they know little else. The main pick-up from their kerbside collection is lightweight stuff such as wastepaper and card.

Thus, we have to look at this from the point of view of the English and Northern Irish householder. We are used to separating waste into different bags and bins—far too many in some council areas—for kerbside collection and to taking plastic, card, glass and paper to big recycling bins. Norway launched its DRS in 1996 after 10 years of discussion, development and testing. I presume that it was also “faffing around” in taking 10 years to get it right. We have neither 10 years of testing nor 30 to 50 years of experience of DRS and I fear that the Government are biting off more than they can chew here, especially with all the other recycling initiatives.

Let us look at a few of my many queries. Wales has already been mentioned. Retailers and importers working in Wales will face the practical difficulties of operating under different schemes—separation of stock, unique label identifiers and new accounting systems. How can the interoperability of the four UK schemes and an avoidance of unique identifiers in the Welsh market be assured? With Welsh proposals not yet published, how can an October 2027 introduction date be assured, to avoid material switching under the EPR scheme? Are the UK Government considering a United Kingdom Internal Market Act exemption for the Welsh DRS? Will they ensure that the divergence of the Welsh scheme does not impact the governance of the UK-Northern Ireland-Scotland DRS on the appointment of a scheme administrator?

A unique approach in Wales threatens seamless intra-UK trading and risks delaying the October 2027 start date. The Welsh Government will not publish their proposals for their scheme until spring and they plan additional initiatives, such as glass reuse and refill schemes. It looks like Wales wants to do in two years a full-on German scheme that took the Germans 50 years to perfect. Unless the Government can persuade the Welsh Labour Government to fall in with the rest of the UK, I would be loath to support this whole scheme in England and Northern Ireland, much as I like the concept of it.

17:30

On a different point, I am concerned about the reasonable refusal provisions in Regulation 10. There will be arguments at the return point when shops refuse to take back containers on the various grounds contained in this regulation. Who will determine what is a “soiled” container, which will be rejected? The regulation says that collectors can refuse to take back containers if there is still liquid in them. How many dribbles of liquid will count towards a container “not being empty” and being refused?

Will automatic reverse vending machines or people do the deposit return? If it is machines, what testing has been done on their ability to cope with hundreds of different container designs? Are the German TOMRA RVMs capable of dealing with all of the drinks container types and sizes that we plan to include? What will be the appeal mechanism for consumers who find their returned bottle or can rejected—not the appeal mechanism against registration for the companies, but for consumers who find that their bottle has been rejected on whatever grounds?

The Government have estimated the scheme’s cost at £288 million per annum. I think that, like all cost estimates under every Government, that estimate is fanciful and wishful thinking. The numbers were also calculated back in 2016. The Government estimated that around 36,000 RVMs would be required, at a cost of £30,000 each and about £3,000 for installation; that comes in at about £1.2 billion, at 2016 prices, which is in line with the all-in-except-glass estimates on page 67 of the impact assessment—at least online; I cannot find it in the printout that we have in the corner over there.

The capital costs are a one-off, but we do not know how long these machines will last; they may have to be replaced every two, five or 10 years, I do not know. If noble Lords look at the costs of administration, handling, collection and maintenance, they will see that they come to £500 million per annum for the all-in—including glass—option. These costs will be borne by the consumer.

Finally, before I leave this topic, we know that Germany has 135,000 return points. What information do the Government have on how many mandatory return points will be needed for this scheme to work in practice in England and Northern Ireland? Take this area of Westminster: I know that there are three big, spacious supermarkets down in Victoria and Pimlico but, between Parliament and Victoria, there are three mini Tesco branches, two Sainsbury’s Locals, two mini Waitrose branches, and dozens of small shops and takeaways such as Pret, Leon, Caffè Nero and Itsu—all selling drinks in containers and all more than 100 square metres in size. Will they have to have a return facility?

That leads me to look at the exemption for small shops, because 100 square metres is tiny and most of the 50,000 small convenience stores in this country will be caught. Regulation 35 says that “groceries retailers” will be exempt but I cannot see a definition of “groceries retailers”, so I presume that any drinks listed in Regulation 3 are groceries.

Also, why is the exemption for urban small shops only? A little tearoom in a country village that permits people to buy and take away a bottle of iced tea or Coca-Cola will be caught, but not a café in an urban area. I looked at the definition of “urban” in Regulation 35, which refers to a definition from the Office for National Statistics that can be found in

“the document titled ‘2011 rural urban classification of output areas’”.

They talk of nothing else in the pubs of Penrith. Is it straightforward? Well, here is just a little sample of the two-page definition. It states:

“Rural areas are those areas that are not urban”—

even I can follow and understand that so far. However, it then goes on to say that

“England was divided into 171,372 Output Areas (OAs) which on average have a resident population of 309 people. OAs are the smallest geographic unit for which Census data are available … By looking at dwelling densities for every 100m x 100m square and the density in squares at varying distances around each square, and then comparing these ‘density profiles’ for different types of settlement, the settlement form across the country can be mapped and this allows every OA to be assigned a settlement type”.

Those are just a couple of paragraphs from a two-page document defining what is rural and what is urban for the purposes of these regulations. I hope the Committee followed that. I quoted them just to show that there is another area where I reckon there will be disputes over the sheer complexity of these regulations, let alone the unfairness of small grocers being exempt in cities but not in rural areas.

The last government policy statement in April 2024 said that

“organisations that sell in-scope drinks containers including hospitality venues, food to go stores, schools, gyms, sports or recreation centres, community centres, and mobile caterers that sell in-scope drinks containers”

would not be

“required to host a return point”

but could do a voluntary one. Is that still the case? What about all the takeaway joints in railway stations and airports, where you can have a sit-down snack but also take away lots of different drinks in cans and bottles? I suppose—I say this only partly in jest—the best place to collect them will be at the airport security checkpoint, where people have to dump all the drinks they wrongly try to get through security. What is the plan for airports and railway stations, with all those drinks containers at the other side of security?

I also have queries about Regulation 18 and exemptions for low volume lines

“if the number of containers of any size or shape in the product line in that scheme year will not exceed 5,000, and … the containers are filled with the same particular drink”.

I query the phrase “the same particular drink”. Hypothetically, if I go back into business with bottles and make 5,000 cans of “Blencathra’s Irn Bru”, sweeten it with sucralose and then make another 5,000 cans sweetened with aspartame and another 5,000 sweetened with saccharin, do I get the exemption for each because I have made a tiny tweak to the recipe? How do the Government define “same” in that sense and how will they manage to police the potential for cheating?

Noble Lords will be relieved to know that I have reached my last page. It is suggested that the deposit might vary for different materials and sizes of containers. That would be another area of complexity for consumers. What research has been done to see how well that would be received by consumers? On deposits, I assume that if I do not return my lemonade bottle to the return point but put it in my kerbside recycling, the shop keeps the deposit. That is okay; it is my fault and my loss. I think the Minister has the same green bags on her side of Cumbria as I do. It is a big enough hassle sorting out everything for kerbside collection every two weeks, let alone lugging bags of it to Sainsbury’s, Markey’s, Aldi or wherever. People in towns and villages in the countryside do not every day pop past shops with return points where they can drop off a few bottles and cans every time. It requires an expedition with a car and big bags of bottles and cans.

However, on a positive note, I can see a good new market for charity organisations. I am sure that the Minister finds the same envelopes on her doormat as I do every time she returns home from London. They contain a bag for used clothing that we can leave out for collection. I can see many of us filling bags with plastic bottles or cans for charities to pick up if it is too much hassle to carry things back to return points. That is perhaps an added bonus.

Finally, what is the situation with Tetra Paks, or fibre-based composites, as I should probably call them? Tetra Paks are 75% cardboard, 20% plastic film and 5% aluminium. I probably buy a few hundred cartons every year, out of the 2.2 billion sold in the UK, but I hate them, since it is impossible to recycle them in our area. I know that a few specialist recycling organisations can do Tetra Paks, but if they are impossible to recycle normally will they be included in the EPR scheme, if not in the deposit return scheme? I do not know whether Tetra Paks will be in the deposit return scheme, but we need action on them to make sure that those 2.2 billion cartons are properly recycled.

I could ask dozens of questions about Part 4 and the registration of scheme producers, and hundreds on Part 7 and the deposit management organisation. Those will also be big areas of contention, and the weak link in the whole scheme. I could also ask lots of questions about the cost of those parts, but I know that further regs will come along to implement those parts of the plan, and we will return to this on many occasions.

In conclusion, I hope that the Government will stick to the October 2027 launch date, which will probably be just a few months this side of a general election. There is nothing like antagonising and confusing a few million electors to get out the votes for the other party.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank all noble Lords who have made valuable contributions and asked extensive questions in this debate today. I will do my best to address as many questions as I am able.

First, the noble Lord, Lord Blencathra, asked a large number of questions. I shall start with his question on why we need a scheme to take back empty drinks containers to the shops, when it will be easier for us just to carry on doing it at home. I shall explain the rationale for introducing a DRS alongside existing recycling collections. In the UK, despite having kerbside recycling systems that collect plastic and metal drinks containers, recycling rates for these materials have stagnated at around 70%, and they continue to represent a high proportion of litter by volume, at 55%. By introducing a DRS, we create a separate waste stream which can improve the quality of drinks containers collected for recycling by collecting them separately from other recyclable materials. Comparable international examples have shown that alongside kerbside recycling systems, a DRS can offer unique benefits to recycling rates and quality, and to littering, by offering a true circularity of the material, meaning that used bottles and cans will be made directly into new products.

The noble Lord, Lord Blencathra, and the noble Baroness, Lady Bakewell, asked about Germany. We believe that the German scheme is a good example of a DRS which has scaled up and matured since it was implemented in 2003. We can learn from an awful lot from the experiences in scaling up a scheme such as Germany’s, but there is also a lot we can learn from deposit return schemes launching more recently, which offer more up-to-date learnings in how you can successfully implement a DRS from scratch in today’s world. This has included engagement with other recently launched schemes in the Republic of Ireland and Slovakia, while drawing on direct experience across many of the European schemes—those in Latvia and Sweden, as well as Germany. As was said, the deposit return scheme in England, Northern Ireland and Scotland will launch in October 2027 and we do not intend to deviate from that, because we want to see the environmental benefits being made.

A number of noble Lords asked specifically about Wales and the interoperability of the four UK schemes. We recognise that this is a challenge and that industry has specific concerns. We are working through the detail with industry, including through facilitating meetings across our devolved nations to understand potential solutions. We are listening to industry’s views to see where we can support and ensure that DRS is successful across England, Northern Ireland and Scotland. But in practical terms, the regulations also allow the deposit management organisation to work in an interoperable way with any other deposit return schemes, so when Wales proceeds with setting up a DRS, the deposit management organisation can work alongside a Welsh scheme administrator. How a scheme works in Wales will of course be for the Welsh Government to determine, but we want to continue to work with Wales and industry as we progress our DRS.

There is currently nothing that prevents DRS items produced in England, Northern Ireland and Scotland being sold in Wales, including those items labelled as part of a DRS. Businesses will need to take this into account when considering how this works for their product lines and supply chains. Any labelling requirements will be a matter for the DMO to provide detail and guidance on.

The pEPR regulations include an exemption for plastic and metal drinks containers across the UK as these materials are going to be captured through the DRS in England, Scotland and Northern Ireland when it goes live in 2027. Glass drinks containers across the UK will, as we have heard, be subject to the pEPR fees from January 2025. Because the future scope of the Welsh scheme is not yet confirmed, we want to work closely with the Welsh Government to ensure that the DRS and pEPR work effectively right across the four nations. Once we have the detail of the Welsh scheme confirmed, we can consider whether any further amendments to the pEPR regulations will be required.

17:45

I was asked whether the UK Government were considering a United Kingdom Internal Market Act exemption for Welsh DRS. Of course, it is a matter for the Welsh Government to consider whether to seek any exclusion from the UK in respect of any legislation that they produce, but any exclusion request must be formally made to the other Governments and must provide clear evidence of the impact on businesses in any intra-UK trade. Any evidence provided by the Welsh Government in support of any formal exclusion request would be considered by the department on its merits.

I was asked whether the Government will ensure that any divergence of the Welsh scheme does not impact on the governance of the England, Northern Ireland and Scotland DRS once the scheme administrator is appointed. We remain in a close working relationship and partnership with the Welsh Government while they are making their decisions. Because our regulations are independent of Wales, they do not need a Welsh scheme in place for the scheme in England and Northern Ireland to work operationally or for the DMO to be appointed. Our regulations also allow the DMO to work with any other scheme administration—that clearly includes the Welsh scheme administrator.

The noble Lord, Lord Blencathra, asked about what is “soiled” and how many dribbles of liquid would count as not being empty. Reverse vending machines can determine if a container is unsuitable for return. The parameters of this can be built into the specification of the machines and will follow the reasonable criteria in the regulations, which include a container being soiled, not empty or not intact. We have engaged with international schemes and reverse vending machine manufacturers to understand the capabilities of the technology that is deployed in schemes around the world. In the rare cases in which reverse vending machines have incorrectly rejected a container, return point operators are able manually to process the return.

I was asked what testing has been done on reverse vending machines’ ability to cope with all the different container designs. Producers will need to register product information with the deposit management organisation; that will include details of container design and dimensions to ensure that these can be processed by the return points. Containers will then be required to carry a unique scheme identifier, or a barcode, which is scanned by the reverse vending machines. These checks and processes will ensure that returns will be possible, regardless of the design of the container.

I was asked about the appeal mechanism for consumers who find that their return bottle or can has been rejected. It is the responsibility of the DMO to issue guidance to retailers to ensure that the appeals and complaints procedure is robust and fair.

There was also a question about what information the Government have on how many mandatory return points would be needed for this to work in England and Northern Ireland and, given that all the shops selling drinks containers in the Westminster area are over 100 square metres, whether they would have to have a return facility. Our regulations set out that supermarkets and convenience stores will be required to host a return point unless they are subject to an exemption. Therefore, takeaways, which have been mentioned during the debate, will not be required to host a return point, but if they want to they can choose to do so. Utilising this, our impact assessment analysis suggests that approximately 41,000 return points across England and Northern Ireland will be set up.

[Lord Hayward (Con)]

In referring to locations in and around Westminster, the Minister said that they were close to 100 square metres and would therefore be required to operate the scheme. That is not quite my understanding from what the noble Lord, Lord Blencathra, said. Could I clarify whether shops and other outlets below that figure will be required to offer those facilities?

[Baroness McIntosh of Pickering (Con)]

Could I add a rider? Will there not be a de minimis rule? I asked about the size of stores; surely there will be a de minimis rule below which stores will not be required to participate.

[Baroness Hayman of Ullock (Lab)]

I have further information around size, which I will come to. The noble Lord, Lord Blencathra, referred to all the shops selling drinks containers in the Westminster area being bigger than 100 square metres. The regulations set out that supermarkets and convenience stores will be required to host a return point unless they are subject to an exemption, which would be given if they did not meet that size and had applied for that exemption—that is how it is set up—or they could opt in. So takeaways are not included, but they could opt in, as the idea is to have a bit of flexibility in the regulations. I think that is correct.

[Lord Blencathra (Con)]

The takeaway joints—the Prets and Leons of this world—do not sell groceries, but people buy cans of drink from them to take away. Irrespective of size, are they included or are they not grocery retailers?

[Baroness Hayman of Ullock (Lab)]

No—as I said, takeaways such as those will not be required to host a deposit return point, but they can opt in if they choose to do so. Automatic exemptions also do not currently apply to rural stores, as we need to ensure that there is sufficient return point coverage for all consumers, regardless of where they live. However, rural businesses are still able to apply to the deposit management organisation for a return point exemption, based on store size, proximity to another return point and suitable premises—for example, if they cannot adapt their premises to host a return point. There are grounds around what premises look like that permit them to apply for an exemption. I hope that has helped to clarify that point.

It is critical that we have sufficient return points such that consumers can take things back to get their deposits back. We also need to minimise the demands placed on businesses wherever possible, particularly on the local businesses that are essential to rural communities. Return point obligations will be kept under review as the scheme becomes more established, because this is clearly complicated, so we need to watch it as it is implemented. We need to ensure that the network is appropriate, is accessible and does not overly burden rural businesses. Coming back to the noble Lord’s final remarks, the DMO, with due regard to work already conducted by the ONS, will help retailers determine whether they are in an urban or rural area. They will not just have to read the regulations, as he pointed out.

I was asked whether hospitality venues, airports and railway stations can host voluntary return points. Under the regulations, other types of organisations that sell in-scope drinks containers, including hospitality venues, food-to-go stores, schools, hospitals, gyms, sports centres and community centres, will not be mandated to host a return point, although all could operate one voluntarily if they wanted to. Grocery retailers in locations such as airports and railway stations will be obliged to host return points in the same way that any other grocery retailer would be. In practice, we expect these businesses to be pragmatic when considering how to host a return point, which may be best achieved by having a centralised return point that operates on behalf of all the retailers in that area. The regulations contain provisions for exemptions and strategic mapping of return points to ensure that the deposit management organisation can work with businesses in high-footfall areas to deliver appropriate return point accessibility.

The noble Lord, Lord Blencathra, asked how the Government define “same” in the definition of low-volume products and how we police the potential for cheating, as he put it. The deposit management organisation will work with producers to help them determine whether a product should be regarded as a low-volume drink. The producer will need to clearly demonstrate how the product constitutes a new product line, with relevant branding and labelling for the drink. The low-volume exemption is designed to support the smallest producers and, due to the cost of labelling production processes, it is highly unlikely that larger producers will be able to take advantage of this measure through the creation of multiple product lines.

I was asked about consumer research on how well a varied deposit would be received by consumers. There was a consultation in 2021; this included consideration of a variable and fixed deposit level, with many respondents agreeing that the DMO should be responsible for determining whether to adopt fixed or variable deposits. It also discussed how it could be varied with respect to many elements, such as material or container size. Our consumer research suggested a preference for simplicity in introducing a DRS, but recently the Republic of Ireland successfully launched a DRS with a variable deposit, based on the size of the container.

The noble Baroness, Lady McIntosh, asked how a deposit level is set appropriately. The deposit management organisation, as I said before, will be responsible for setting that level. It is incentivised to balance the need to ensure that returns are at the targeted level with the need to ensure that products remain affordable. We have commissioned research that showed that an effective deposit level is typically around 15p to 25p. This aligns with international precedents. For example, the DRS that launched in Ireland last year has a 15 cent and 25 cent variable deposit level based on volume. We are confident that the risks of a deposit level being too high or low are being managed, and we have sufficient levers in place to mitigate it being set at a level which impacts consumer affordability. But, as a last resort, Ministers also retain the power to remove the deposit management organisation and take control of the scheme under certain conditions.

I was asked who keeps the deposit if I buy a drink from a shop but recycle it at home. Consumers must return the container to a return point to redeem the deposit. Any financial surplus made by the scheme, for example through unredeemed deposits, will be reinvested into the scheme to fund the overall running costs. Again, this is in line with international schemes. I hope that answers my noble friend Lady Ritchie’s question about where the money goes.

However, for material which is recycled in kerbside collection, we anticipate that the deposit management organisation will work closely with local authorities to ensure that as much material as possible is returned via return points, and to help meet collection targets and keep material within the closed-loop model of the DRS. Local authorities and, where relevant, waste operators will be able to separate out containers and redeem the deposit on them, provided they meet the criteria for return.

Noble Lords asked specifically about Tetra Paks. The deposit return scheme focuses on containers made wholly or mainly from PET, aluminium or steel. This material can easily be recycled through the closed-loop system and reused by producers to make new containers. Unlike PET, aluminium and steel, which are collected from all local authority kerbside collections, just 64% of local authorities in 2022 collected beverage cartons. As the noble Lord said, that does not happen in our area. But with the introduction of simpler recycling, beverage cartons will be collected from all kerbsides. Therefore, Tetra Paks and other material combinations which are harder to recycle will be captured by the pEPR legislation and associated fees.

A number of noble Lords asked about the exclusion of glass. As was rightly pointed out, England, Northern Ireland and Scotland will not be including glass when the DRS is introduced. 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 well as disproportionately impact small breweries, and be inconvenient for consumers due to its weight and potential for breakage in transit to a return point. Glass drinks containers across the UK are included in the scope of the extended producer responsibility for packaging scheme to make sure that they are appropriately and efficiently recycled. Additionally, the glass recycling targets within the packaging scheme have been increased from 83% to 85%, but we are also considering how reuse systems could be developed in the future.

18:00

The noble Baroness, Lady McIntosh, asked about local authorities in particular. We anticipate that the scheme will collect upwards of 90% of DRS containers placed on the market from the third year of its operation. It is likely that many of the containers that are not returned will continue to travel through local authority waste streams, such as kerbside recycling. We think that the introduction of a DRS will have a varying impact on local authorities, as there will be losses in sales and material for those who sell on recycled material but also efficiency savings from collecting and processing less material.

[Baroness McIntosh of Pickering (Con)]

I asked specifically about the Minister’s point on monitoring and enforcement by local authorities. Will they have the resources to do that going forward?

[Baroness Hayman of Ullock (Lab)]

We want, as we bring the scheme in, to work closely with local authorities to be aware of any impacts on them and to ensure that they have the resources they need to manage the scheme effectively. I shall move on because I have been speaking for a long time.

Implementation timelines came up. The Government are not faffing around. Some people think that we are moving too quickly while others think that we are moving too slowly, but there is a scale to this challenge and a lot of effort from industry will be required to deliver the DRS. We believe that our timeline will provide the industry with the amount of time that it needs to implement the scheme properly. It assumes 12 months for the DMO to scale up, to make key decisions and to make the relevant appointments in its delivery partners, then 18 months of practical implementation time. That is why this timeline, which was agreed with industry and represents international best practice, has come in.

The noble Lord, Lord Blencathra, asked about costs of set-up and implementation. Following an impact assessment last year, we updated the previous figures, but it is important to consider that some costs will be compensated through the retailer handling fee, paid by the DMO. There are also benefits from increased footfall. Obviously, some costs could be passed on to consumers, but international evidence suggests that this would be relatively minor and well within the scope of the normal cost variations in the sector.

The noble Lord, Lord Hayward, and the noble Baroness, Lady Bakewell, asked about the impact on small businesses. There are exemptions for small retailers, as I mentioned earlier. The DMO will be required to consult with businesses of all sizes before it makes any of the key scheme decisions, such as on fees.

My noble friend Lady Ritchie asked about Northern Ireland. The Environment Act, under which this statutory instrument is established, provides powers for the Secretary of State to legislate on behalf of Wales and Northern Ireland, with their consent. On Northern Ireland, DAERA asked Defra to legislate on its behalf, which is why we are including Northern Ireland in the legislation.

I have been talking for some time. I hope that I have covered most of the questions asked by noble Lords; a lot of questions were asked. I assure the noble Baroness, Lady Bakewell, that Defra is determined to make this work; I thank her for her support for these regulations. I hope that I have answered most of the questions asked and trust that noble Lords accept the need for this instrument.

Motion agreed.