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

Lord Blencathra Excerpts

Monday 20th January 2025 Grand Committee

[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.

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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.

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[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.