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