Scrap Metal Dealers Bill

Debate between Richard Ottaway and Jonathan Evans

Friday 13th July 2012 Commons Chamber

[Richard Ottaway]

My hon. Friend makes a good point. Putting SmartWater on to cables and using a UV light on materials that come into yards is acting as a deterrent. However, such is the nature of market forces that people are already beginning to find a way round that. Technology has to move on and continue to provide a deterrent—again, a point I shall come to in a minute.

The escalating problem of scrap metal theft results from the confluence of two things: the global rise in commodity prices over recent years and a badly regulated industry, which my Bill will tackle. It proposes a tough but fair regime for our scrap metal industry. It will support legitimate dealers and penalise the parasites who profit from the things we hold most sacred.

[Jonathan Evans (Cardiff North) (Con)]

I am grateful to my hon. Friend for mentioning the incident at Llandough hospital, which affected the operations of very many of my constituents. Surely there is also a third aspect: what happens at the present time to those engaged in such activities who are caught. We had another incident in south Wales—a notorious incident—involving the Pontardulais town band, all of whose instruments were stolen. The leader of the band contacted the local scrap metal dealer to warn him of the theft, yet half an hour later the instruments were received by the dealer, crushed, for £61, and the court imposed a £500 compensation order. Is that not part of the problem as well?

[Richard Ottaway]

Absolutely, and those are two points that I shall be coming to. Indeed, as my hon. Friend has illustrated, in some cases half an hour can be too long. Sometimes it takes only minutes from the theft for the metal to become untraceable, it having been processed and converted into cash by thieves.

I have visited many scrap yards in recent weeks—I can assure the House that in this weather it has been a character-forming experience for me. There are more than 2,500 legal scrap yards and hundreds of illegal ones. At the bottom of the industry’s pyramid are the thousands of mobile collectors—sometimes known as “itinerants”—who collect scrap metal from houses, small businesses, plumbers, electricians and factories. We have no idea of the numbers or exactly what they get up to, which is part of the problem. Mobile collectors sell scrap metal to yards, which clean up the product, stripping cable from wires, sorting the different metals—lead, copper, brass: you name it—chopping up large bits of metal into small pieces and packaging it into lots for onward sale. The small yards feed it to the medium-size yards, which continue to process it and sell it to the large yards. The majority of the non-ferrous metal that comes out at the end is packed into 25-tonne containers and exported abroad, or sent to the 20 to 30 furnaces in the UK.

The greatest opportunity for stolen metals to get into the chain arises at the bottom of the pyramid. Some of this is done by organised criminals, and some by young kids trying to make a quick buck. Either way, we have a problem that needs to be addressed. It is the prevalence of cash transactions, together with the anonymity and lack of traceability of the stolen metals, that fosters criminal activity. It is all too easy to convert stolen metal into cash within minutes. With the world price of copper at almost £5,000 per tonne, the temptation is irresistible.

We need new legislation. The existing regulatory regime is the Scrap Metal Dealers Act 1964. Incidentally, that legislation was introduced as a private Member’s Bill following a spike in world commodity prices, so things do not change much. The Act is now out of date and requires wholesale reform. Under its provisions, scrap metal dealers are required to register with local authorities, but the authorities have no power to turn down or revoke a licence. Indeed, the obligation to get a licence is often ignored. There is nothing to compel accurate record keeping or to verify the ID of the seller. False names and addresses are logged with impunity—Mr M. Mouse and Mr D. Duck seem to be regular traders. Under the Act, there is a complete lack of co-ordination between the authorities, which have limited powers of inspection. Scrap metal dealers are also able to trade in cash.

Concerns have been expressed over the proposal in my Bill to outlaw cash payments altogether, and I should like to address that point directly. The Legal Aid, Sentencing and Punishment of Offenders Act 2012, which received Royal Assent earlier this year, will ban cash payments except for mobile collectors and car breakers. I welcome this move, but it does not go far enough. We are still left with numerous points where stolen metal can be sold for cash and infect the pyramid.

Allowing cash payments for itinerant collectors in house-to-house collections creates a loophole. That is where most of the criminal activity takes place. Before we know where we are, businesses will be run from garages and the back gardens of people’s homes. A complication arises because those collectors also collect from businesses, and the product is mixed up. It then becomes impossible to identify which metal has come from households and which has come from businesses.

No records are kept and no taxes are paid. A mobile dealer who handles, say, three to four tonnes of scrap metal a day—which is not unusual—could earn up to £200,000 a year, which is significantly above the £77,000 VAT threshold. Once business taxes are taken into account, it is estimated that more than £1 billion is being lost to the taxman each year. This practice creates a distorted marketplace, with bona fide registered dealers paying VAT and taxes while the tax avoider gets a competitive advantage. The industry itself is crying out for a level playing field.