Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024

Baroness Hayman of Ullock Excerpts

Thursday 28th November 2024 Grand Committee

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[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.

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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.

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[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.