Waste and Emissions Trading Bill [Lords]

HC Deb 20 March 2003 vol 401 cc1128-76

Order for Second Reading read.

2.45 pm

The Minister for the Environment (Mr. Michael Meacher)

I beg to move, That the Bill be now read a Second time.

The Bill combines action on two key environmental objectives—climate change reduction, and the need to move to a more sustainable management of our waste. There are strong links between the two challenges, as the poor use of resources which leads to ever increasing amounts of waste, and the poor management of that waste, all increase the production of greenhouse gases.

The Bill approaches these challenges through the use of economic instruments. It will stimulate reductions in the emission of pollutants and make us less reliant on landfill, in the most economically efficient way. It will support the world's very first economy-wide greenhouse gas emissions trading scheme through a system of statutory penalties. It will also set up a landfill allowance trading scheme—probably the first scheme of this type to address waste in Europe, and possibly the first in the world.

These are large claims for a Bill of only 38 clauses, and I am sure that many hon. Members would like to have before them a Bill that covered all aspects of climate change and waste management. However, this Bill is only part of what the Government are doing, and will be doing. To tackle greenhouse gases, the UK published its climate change programme in 2000. That programme set out a far-reaching strategy for reducing emissions across all sectors of the economy and for adapting to the effects of climate change that are happening already.

For waste, our starting point is Waste Strategy 2000, which tackles the management of all waste streams. For the municipal waste stream, our starting point is the strategy unit report entitled "Waste Not, Want Not", to which we will be responding very shortly. I would be the first to say that the Bill is only part of a much bigger picture, but it is an important and innovative part.

The Bill allows trading to be used to meet environmental goals. For landfill, local authorities will receive landfill allowances, which represent the maximum amount of biodegradable municipal waste that they may landfill. Those allowances will reduce year on year.

Mr. Bill O'Brien (Normanton)

I am grateful to my right hon. Friend for allowing me to intervene on his opening remarks. I appreciate the opportunity. On the question of allowances and payments to local authorities—especially the disposal authorities—will my right hon. Friend give an assurance that all the costs involved will be met? Local authorities will encounter extra problems with the collection and recycling of waste, and disposal will also be an important part of their work. Will he ensure that council tax payers will face no extra costs as a result of this business?

Mr. Meacher

My hon. Friend raises an important point. When it was raised in another place, the Government responded by moving a right of direction for disposal authorities to give to collection authorities. That will ensure that the form of delivery of what is collected will be in a manner agreeable to the disposal authorities, so as to maximise the opportunities for recycling. We think that that will resolve the problem. Equally, we have been in touch with the Local Government Association, and we remain willing to listen to what the local authorities say to us. The answer is that there should be no extra cost.

Mr. David Chaytor (Bury, North)

Will my right hon. Friend give way?

Mr. Meacher

I will, but I have a lengthy speech and I am wondering how far I will get.

Mr. Chaytor

I assure my right hen. Friend that I shall be brief. He said that the Bill is only a small part of the Government's strategy to deal with the waste management crisis and respond to the threat of climate change. Does he see merit in establishing a trading system for non-biodegradable waste? Would that form part of future legislation?

Mr. Meacher

We have not considered that. The landfill targets in the Bill—they are the ultimate driver behind the Bill and other legislation—are concerned exclusively with biodegradable municipal waste. That has been a serious problem for this country, which has one of the highest levels of landfilling of biodegradable municipal waste in the EU. I am not sure whether Greece's level is higher, but ours is extremely high. That is our prime target. That will be a difficult enough task because we inherited a rate of landfilling of biodegradable municipal waste of about 85 per cent. It is now below 80 per cent., but is still extremely high. Once we have secured that target and aligned our waste management strategy to meet our landfill targets—the primary concern of my right hon. Friend and me—we can look further. But it will be difficult enough to meet existing targets without extending them gratuitously.

Trading is a flexible and cost-effective economic instrument that allows reductions—whether in the biodegradable municipal waste going to landfill or in emissions of greenhouse gases into the atmosphere—to be made where it is most cost-effective to do so. It is a market system to achieve environmental objectives. In both parts of the Bill, the holder of steadily reducing landfill allowances or emission targets has three choices. First, they may take direct action to reduce their landfill or emissions to their allowance or target level. Secondly, they may reduce below the target and sell or save the surplus. Thirdly, they may choose to exceed the target or allowance and purchase excess allowances that are needed from those who have made cuts and are willing to sell in this way.

Norman Baker (Lewes)

There is a fourth option as well: the holders can choose to incur a penalty. I do not say that flippantly. They may make the calculation that the cost of a permit—demand for which will be high— is such that it might be cheaper to incur a penalty from the allocating authority. Has the Minister considered that?

Mr. Meacher

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. Before the right hon. Gentleman replies, I ought to update a statement I made earlier about Carriage Gates. Members should be advised that the gates are now closed again because of the security situation.

Mr. Meacher

The hon. Gentleman raises an interesting point. In a market system, between buyers and sellers, the price is set by the market. Depending on the demand for excess allowance, I would expect the price to be pitched at a level that acted either as a sufficient incentive or as a sufficient deterrent, whichever way one looks at it. I am prepared to consider his point if such a situation arises, but I doubt it.

The required overall reductions are still met, whichever of the three options is adopted, but trading will provide flexibility by allowing additional reductions to be made where that is most cost-effective. In all cases, reductions will still be made over time. That is the key point. We will meet environmental objectives and our landfill targets systematically.

Ms Joan Walley (Stoke-on-Trent, North)

Does my right hon. Friend agree that although much of the Bill is good, as it is against landfill and is trying to reduce the amount of waste we put to landfill, there is a danger that we could be promoting incineration over other forms of dealing with waste? Will he look at introducing a binding cap on incineration in addition to the measures in the Bill on landfill?

Mr. Meacher

We are not providing any incentives for incineration. As a result of the "Waste Not, Want Not" report of the strategy unit, the Government are looking at the wider health and social implications of different parts of the waste stream, including incineration. My hon. Friend's considerations will be assessed in the report. Obviously I cannot presume any conclusions that might come from the report. However, I see no reason why the Bill might encourage incineration. We are clear about the waste hierarchy, and incineration is only just above landfill.

The first part of the Bill tackles the requirement in the landfill directive to reduce the United Kingdom's reliance on landfill. The United Kingdom currently landfills nearly 80 per cent. of biodegradable municipal waste. Landfill produces methane, a greenhouse gas that is 21 times more powerful than carbon dioxide; 25 per cent. of all UK emissions of methane come from landfill sites.

As well as the implications for climate change, landfilling constitutes the loss of valuable resources that are locked up in the waste. Many of these resources, in our view, could be reused or recycled, or have the energy extracted from them.

Landfill is at the bottom of the waste hierarchy, which is how we determine the relative environmental impact of different waste management options. At the top is waste minimisation; in other words, we should be reducing or minimising the amount of waste that we produce. Best of all is not to create the waste. That is not going to happen very often, although it can be incentivised more; we are keen to do that.

Thereafter, we should reuse what would otherwise be waste, followed by recycling; the third is recovery through composting and energy recovery. At the bottom comes disposal or landfill. To tackle problems associated with landfill and to move from a reliance on it, the UK—along with our European partners—agreed the landfill directive in 1999. I want to make it clear that although it is difficult for the United Kingdom, we believe it to be the right legislation. This directive includes stringent targets to cut the amount of biodegradable municipal waste that is sent to landfill.

Sue Doughty (Guildford)

The Minister refers to different options, but clause 17(3) in particular suggests that targets can be met by recycling, by composting and by energy from waste. Is not incineration sitting at the same level as recycling?

Mr. Meacher

If the hon. Lady had been listening—I am sure she was—when I spelled out the waste hierarchy, she would have heard me say that, after minimisation, the next requirement is recovery and reuse. Of course, one of the options remains recovery of the energy from waste; that is better than burying it in the ground. But the Government have made it clear that the prime concerns are recovery, reuse, recycling and composting. We are clear about that, but we are not excluding the other option, which would still be better than landfill. However, we strongly prefer the first four.

Mr. Bill Wiggin (Leominster)

What would happen if a council were to compost its biodegradable municipal waste and then use it for landfill? How would that fit in with the quota?

Mr. Meacher

It would not fit in at all well, because such waste would still be biodegradable municipal waste even if it had been composted. It would probably turn into a type of sludge that would have to go to landfill. That would tell against our landfill targets, so the Government are strongly against any such proposal.

Within the United Kingdom, environmental protection is a devolved matter. It is therefore for each of the Administrations to put in place their policies for meeting the reductions in landfill required by the landfill directive. The Administrations have agreed to act together towards this common goal, and have agreed that this Bill should be considered in total and as a unity by this Parliament. That is helpful and will increase the effectiveness of the measures by widening the area for potential trading and by ensuring that the UK as a whole can meet the reductions required in the most cost-effective manner.

The obligations on the UK under the landfill directive—even allowing for a four-year derogation that is open to us because of our heavy reliance on landfill—require a 25 per cent. cut in biodegradable municipal waste from that produced in 1995, a lower level than that of today, by 2010; a 50 per cent. cut by 2013 and a 65 per cent. cut by 2020. That is a huge challenge. As I repeatedly say, if we were to do nothing—the opposite of what we will do—and were to have business as usual, the amount going to landfill would probably double over that 20-year period. Instead, we have to reduce it by two thirds. That is a massive challenge, and the Bill is at the heart of meeting it.

Mr. Michael Weir (Angus)

Something that concerns me slightly about the trading aspect of waste management is the fact that it is clear that one cannot trade across the target years that the Minister has just mentioned. Is there not a danger that some authorities will not take the issue seriously until they come up against the buffer of the target years? Might it not be better to have shorter periods so as to reduce the dependence on the three target years?

Mr. Meacher

The target or trip points were laid down in the landfill directive and are not a matter for the UK to determine. We are making it clear to local authorities that they can trade across years, but that they cannot trade across target years. That might put the achievement of our targets at risk. We are making that clear, and we shall make it clear in guidance. It would not be possible to do what the hon. Gentleman suggests partly because of the directive and partly because the framework in which we have to meet it is laid down for us. It is not a matter for our discretion.

Municipal waste is growing at 3 to 4 per cent. a year, with recycling increasing only at 1 per cent. a year. That is another indication of the challenge that faces us on the alternative to landfill. Therefore, we are still landfilling more biodegradable municipal waste than ever and, each year, we are getting further from achieving our legally binding targets. I make no attempt to hide the seriousness of the challenge that we face.

The landfill directive targets and, therefore, the Bill concentrate on the biodegradable municipal waste that is the direct concern of local government. Biodegradable waste represents about 63 per cent. of all municipal waste and is a cause for concern due its very nature. Methane is produced as a by-product of both aerobic and anaerobic decomposition, which means that the waste rots either with or without the presence of oxygen. This branch of the waste stream includes paper and cardboard, food and garden waste and natural textiles. That forms a very large proportion of the household waste stream. The aim of our sustainable waste management policies is to move these wastes up the waste hierarchy and towards their reduction, reuse, recycling or recovery and away from simply dumping them in landfills.

We recognise the scale of the challenge and the large investment in alternatives to landfill that are required. The changes in the way in which we manage our waste create obligations on us all as producers of waste. We all continue to create waste. However, as the targets relate to municipal waste under the directive, we have to look to those who manage and control this waste—that is, the local authorities—to achieve compliance. That is why the landfill allowances relate to local authorities—this is the point that my hon. Friend the Member for Normanton (Mr. O'Brien) raised—and specifically to the waste disposal authorities that dispose of the waste to landfill.

Joan Ruddock (Lewisham, Deptford)

My right hon. Friend is talking a great deal about the responsibilities of local authorities, and we all appreciate them. The position is getting more complicated by the moment and local authorities have more to do. Does he agree that if they were to have a statutory responsibility to develop a waste strategy, that would help them to manage all their new responsibilities and the complexities that exist in dealing with waste?

Mr. Meacher

My hon. Friend makes a point that is directly relevant to her Municipal Waste Recycling Bill which received its Second Reading last Thursday. [HON. MEMBERS: "Friday."] I beg the House's pardon. My hon. Friend makes an important point. She will know that the issue arose in another place and that an amendment to the Bill was accepted that requires local authorities to set out statutorily their waste management strategies. That is the basis on which the Bill comes before the House. In the light of the fact that the Government opposed the amendment but lost in another place, we are reconsidering the issue. We shall return to the House with our conclusions. I am very much aware that this point applies to my hon. Friend's Bill.

Mr. David Drew (Stroud)

My right hon. Friend has been characteristically generous in giving way. Perhaps we will discuss the Bill in interventions, so that we will not need much of a debate later. Surely, we must put the onus on to local authorities. However, as my right hon. Friend and my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) said in relation to her Bill, the onus must also be placed on the individual. We cannot beat about the bush. We must make it clear that local authorities must charge according to the amount of waste produced by individual households. People will then start to learn that they must recycle, not just for some sort of spiritual reason but out of sheer economic necessity. Should we not move towards such an approach?

Mr. Meacher

The strategy unit's report "Waste Not, Want Not" recommended that the Government consider the proposal that my hon. Friend mentioned. Contrary to what many people think, the system sometimes known as variable charging does not constitute a double whammy in the council tax. It is not an addition to the element in the council that is chargeable for waste collection, but replaces it. As he said, it depends on the amount of waste that a household generates. I entirely understand his point about the need to incentivise people to try to create less waste. The Government are considering the issue in their response to the strategy unit report. We will give our formal response to all the elements in the report quite soon.

Paddy Tipping (Sherwood)

Will my right hon. Friend give way?

Mr. Meacher

I will give way, but I wonder whether anyone will have time to make a speech.

Paddy Tipping

My right hon. Friend has referred to the amendment made in another place. Composting has an important place in our strategy, so will he carefully consider that amendment and examine carefully the advice given by bodies, such as the Composting Association, so that we ensure that composting takes place and is not prevented?

Mr. Meacher

Composting is unquestionably very important, and the Government are very keen to promote composting of a high standard. However, clause 22, which deals with the definition of composting, was introduced in another place and, again, it was carried although the Government opposed it. I am advised that it includes requirements for the treatment of waste containing animal products into compost that would, in practice, turn the compost into sludge and render it useless as compost. We will obviously take account of what my hon. Friend has said and consider the issue further, but we must be extremely careful to retain a definition of compost that makes sense and, at the end of the process, does not simply lead to more biodegradable waste going to landfill.

Those hon. Members who have followed the issue closely will know that we proposed a permit system when we consulted. I do not wish to deceive anyone, so I should say that we have changed that term to "allowances" for legal clarity because landfill sites are also subject to pollution prevention and control permits, and we have therefore decided to use another term.

Part 1 will give the Secretary of State the power to specify the maximum amounts of biodegradable waste that can be sent to landfill sites in each of the four countries of the United Kingdom. She must do so after consulting their Administrations, and that must be done for each target year in the landfill directive. For the interim non-target years, she may set limits in each country, or a default formula can be used. The default would ensure an even profile of reduction, thus helping the UK to meet the targets.

After that initial division, responsibility for setting up and operating an allowance scheme rests with each country, obviously because environmental policy is a devolved matter. So the purpose of the Bill is to set the framework, with the detail being decided by each country. Each country will have the flexibility to produce its own scheme and details will be set in regulations. Each country will also have to decide whether to permit trading in its area. Those countries that decide to allow trading could then become part of a cross-border scheme. I can confirm that England intends to introduce a trading scheme and would be prepared to take part in cross-border trading if others wished to do so.

As the Bill provides flexibility for the detail of the trading scheme, it could be somewhat different in each country within the broad legal framework. For example, some Administrations may decide that allowances can he borrowed over years—others will not—but no country can allow such borrowing across target years, as that would put at risk the UK targets. The hon. Member for Angus (Mr. Weir) raised that issue a little while ago.

There will be an absolute duty on each waste disposal authority not to exceed the allowances that it holds irrespective of whether they were acquired by direct allocation or as a result of trading, banking or borrowing. However, local authorities will not be obliged to trade; they may simply landfill within their allotted allocation. Equally, there will be no requirement to trade for a monetary value—a simple transfer is permitted.

As trading under the landfill allowances scheme would involve public bodies and there is no intention for that to become a speculative market, the Bill will not allow third parties to hold or trade allowances for a number of reasons. We want to provide opportunities for local authorities to trade any surplus. The targets are already very challenging for the UK, so we do not want allowances removed from the system. We do not want waste companies to purchase allowances and to use them, for example, to determine the procurement of local authority waste contracts.

Each waste disposal authority will receive an allowance, which is the maximum amount of biodegradable waste that it can landfill in a year. The intention in England is to allocate allowances for each year from 2016 to 2020. Local authorities can then plan their progressive diversion from landfill. However, we recognise that the position can change over 16 years, because we make better progress towards meeting the directive targets than we envisage at present, so the Bill contains a provision to revise the allocations if that proves necessary or helpful.

If a waste disposal authority landfills more biodegradable municipal waste than the allowances it holds, it will be liable to civil financial penalty. The penalties will be set at a sufficient level to ensure that the local authority has the incentive to divert from landfill or acquire allowances, rather than breach the limits. That is obviously essential to secure the landfill directive targets and to underpin an effective trading market.

The landfill allowance schemes will be monitored by the monitoring authorities appointed for each country, and we expect those to be the respective environmental regulators. That will minimise the burden on landfill operators because the environmental regulators are already responsible—I understand that, in Northern Ireland, they soon will be—for regulating landfills and collecting information from their operators and local authorities. Where trading is permitted, it is intended that the monitoring authorities will also be responsible for recording each trading transfer on a central register.

The aim, however, is to encourage local authorities to meet their targets in a sensible and co-ordinated way, not to take away resources without justification. Obviously, we do not wish to do that. That is why there is provision for the allocating authorities to extend the time for paying or to relieve liability to penalties if, for example, the local authority that has breached its allowances has a strategy in place to bring itself back on track.

The importance of the target years is recognised by the provision for supplementary penalties in those years where a local authority landfilling more than it is permitted could lead to the UK breaching its legal obligations under the landfill directive, possibly becoming subject to a European Court of Justice fine. That reflects the seriousness with which we take our international obligations and—let me be frank—the possible penalties of up to £180 million a year for breaching the directive targets.

The constituent countries of the UK will be responsible for meeting their share of the UK targets and for any associated financial costs or penalties by means of a concordat. There will also be criminal offences for landfill operators who fail to comply with the requirements of regulations, and there may be offences for a breach of scheme regulations, such as restrictions on banking or borrowing. There are also penalties in relation to the details of the scheme, such as record keeping or the rules for saving allowances.

In another place, concern was expressed that the duty to reduce landfill was placed on waste disposal authorities when some of the means of delivering the targets, such as the collection systems that facilitate recycling—my hon. Friend the Member for Stroud (Mr. Drew) made this point a little earlier—are in the hands of the waste collection authorities. Of course, that only presents a problem in two-tier authorities. We expect that the authorities will plan together to achieve targets. However, where that is not the case, we will provide a power for waste disposal authorities to issue a direction to collection authorities on the manner in which waste is delivered for disposal, so it can be delivered in a form that facilitates recycling.

Dr. Alan Whitehead (Southampton, Test)

Is it the Government's intention to attach any sanction to the directions that my right hon. Friend mentions, so that the waste supplied by the waste collection authorities is guaranteed to be in a form suitable for the waste disposal authorities?

Mr. Meacher

Of course, if the House accepts the proposal that we introduced in another place, there would have to be an enforceable power of direction. There is no question about that. Obviously, again, we would much prefer disposal and collection authorities to work together. We do not want such things to be done by legal enforcement and penalties. However, as with all systems, there must, be an ultimate form of external enforcement, so that will certainly be there.

Dr. Whitehead

For those of us with two-tier authorities this is the nub of the problem. Is it not worth considering treating the waste disposal and waste collection authorities for this purpose as one authority and making that clear to the waste collection authorities? There will be good waste collection authorities working with the waste disposal authority, and also bad ones. The danger is that the bad ones will almost certainly rely on some degree of subsidy, and that is unfair. Can we not just treat them as one authority?

Mr. Meacher

I will not say that that is the nuclear option—it is perhaps not an appropriate phrase at this time. That is a rather extreme way of resolving the problem. There are much wider implications about the division of responsibility between district councils and county councils. Simply to amalgamate them to overcome the problem is to go too far. We are right to find a way of getting them to work together compatibly in terms of the waste management strategy, but not to the extent of amalgamation.

I was going to go into detail about parts 1 and 2 of the Bill, but in view of the length of my speech I will not. In conclusion, I am proud—

Paddy Tipping

My right hon. Friend can be proud about emissions trading which is in part 2 of the Bill. The Government have done extremely well on that. Will he help me in relation to coalmine methane? It is a major pollutant that can be converted into energy. The Government acknowledge that in the White Paper, but can they see the way forward to make it happen? Will this Bill help the conversion of coalmine methane to energy?

Mr. Meacher

The Government are keen to see coalmine methane tapped and used as an energy source, and not vented into the atmosphere. That is in everyone's interests. I have met the Association of Coalmine Methane on two occasions. There is no internationally agreed technology for determining the contribution of reducing coalmine methane in terms of our international greenhouse gas reduction targets. That is one remaining problem. In the absence of an internationally agreed technology, we cannot secure benefit in terms of our own target. We have commissioned extra research to provide that methodology and I would expect is to be ready within two years, but I am afraid that will not be immediate. I have examined this in great detail and I am sympathetic to what the operators want to do, but we cannot overcome that problem at this time.

Ms Walley

Many of us are extraordinarily proud of what we are doing to combat global warming. The ceramics industry in Stoke-on-Trent has been efficient in implementing the whole of the carbon levy. In view of the emissions trading schemes outlined in the Bill, can my right hon. Friend give the House some indication of the discussion that he will have with the industry, the Confederation of British Industry and the trade unions in respect of forthcoming and pending European directives?

Mr. Meacher

My hon. Friend must be telepathic because this is the one remaining part of what I was about to say, so I shall answer her with the brief which effectively deals with her point.

We are pleased that we launched the world's first economy-wide greenhouse gas emissions trading scheme in April last year. Absolute emission reductions will be delivered to help us meet our international obligations. In addition, a voluntary participation scheme is giving UK business, Government and the City of London a head start on the practical operation of such schemes prior to the introduction of EU and international trading schemes. The EU scheme becomes operative in 2005.

The Bill does not set up the scheme or determine eligibility; it simply provides a statutory basis for penalties for the current scheme and for any future emissions trading scheme. The statutory penalties are important to secure value in emissions allowances and to underpin the market. The UK emissions trading scheme is complex, so perhaps the House can endure a couple of minutes while I try to explain the place that it has in the Bill.

There are currently three types of participants. The penalties provided for by the Bill will apply to the direct participants. They have taken an absolute five-year emissions reduction target from sources within the scheme in return for a financial incentive. They are responsible for emissions from power generators rather than the generators themselves. Some 34 organisations are involved, spanning sizes and sectors including the public sector. The main exclusions are power generators.

The second target holders are climate change agreement participants. These agreements between the Government and sector associations and operators in 44 energy intensive sectors set energy or emission reduction targets. Should they meet their target, they receive an 80 per cent. discount from the climate change levy. Holders can use the scheme to buy allowances to help meet their target or they may make greater reductions and sell their surplus.

Thirdly, there are the trading participants who do not hold targets but simply buy and sell—in other words they speculate—in the allowance market and provide additional liquidity. This Bill, then, delivers on the promise explicit in the contracts and other scheme documentation to provide for statutory penalties for direct participants who fail to meet their annual emission targets. They will be welcomed by all participants in the scheme because it is in their interests to have a robust, secure market. The Bill does not change compliance for climate change agreement participants because their penalty is to lose their 80 per cent. levy discount. That is a powerful driver.

The Bill also takes the opportunity to prepare for future emissions trading schemes and to ensure that they can have a robust compliance base. The Bill gives a power to provide for penalties in future emissions trading schemes and such potential schemes may cover other pollutants regulated under the Pollution Prevention and Control Act 1999 and the regulation, such as acid rain gases, sulphur dioxide and nitrogen oxide.

The Bill puts the tools in place to help us tackle some of the biggest environmental challenges that we face as a nation and internationally. It does that through innovative instruments, which will enable burdens to be spread more effectively. It uses market-based tools, which should deliver more economically optimal solutions. On that basis and with apologies for the length of my speech, I strongly commend the Bill to the House.

3.28 pm

Mr. David Lidington (Aylesbury)

After one or two of the press reports last weekend, I suppose that I should start by saying that I am genuinely glad to see the Minister in his place on the Government Front Bench today. We have a number of questions to ask and a number of criticisms to make of the Bill and of the Government's policy. However, in general, I welcome the Bill as a constructive measure that is designed to secure good environmental outcomes.

I am glad, too, that my hon. Friend the Member for Mid-Bedfordshire (Mr. Sayeed) is in his place. I am sorry, however, that he is not on the Front Bench. I take this opportunity to pay tribute to the tremendous work that he has done as a member of the Opposition Front Bench team, shadowing the Department for Environment, Food and Rural Affairs in the eight or nine months that he has been under my leadership.

A system of allowances or permits is an imaginative way in which to harness the power of the market and the price mechanism to deliver good environmental outcomes. We have already seen—especially with the experience in the United States with sulphur dioxide emissions—that this type of instrument can work, as the Minister said, with flexibility and cost-effectiveness to deliver results in the general interest. I welcome the suggestions made by the hon. Members for Bury, North (Mr. Chaytor) and for Stoke-on-Trent, North (Ms Walley) that the model in the Bill might be applied in future to other types of emission. Although no panacea will deliver all the environmental improvements that we want, I believe that permit or allowance trading schemes should form an important part of this country's environmental policy.

I want to talk about part 2 of the Bill. For understandable reasons, part 2 has tended to be overlooked in debates in the House of Lords, where attention has concentrated on waste policy provisions. I agree with the Minister that the penalties that are incorporated in the Bill were always seen as part of the Government's emissions trading scheme. Their incorporation should not be controversial. However, we should reflect on our experience of the first year of trading in carbon dioxide emission permits. When the Minister responds to the debate, I hope that he will tell us about the Government's assessment of how much difference the emissions trading scheme has made in practice. He will know that, in the past couple of weeks, Enviros Consulting has published its assessment of the ETS. It concluded that most of the direct participants in emissions trading—the companies that are the subject of the penalties in the Bill—entered the scheme when the level of emissions from their firms was falling and predicted to fall further. In effect, they were getting a financial incentive from the Government for delivering what they were on course to deliver anyway. I accept the Minister's statement that there have been benefits to this country in having an emissions trading scheme and in getting there ahead of many of our competitors—we have expertise and skills and the ability to sell them elsewhere in the world. However, it would be useful if the Minister could give us the Government's account of whether the ETS has delivered reductions in emissions in its first year, or whether it has simply provided a framework within which trends that were already apparent have continued.

One million tonnes of carbon dioxide were traded in that first year. From the consultants' report, it looks as if direct participants were overall sellers of surplus permits and their buyers were already the big energy users in climate change agreements. An interesting question arises over the relationship between the climate change agreement participants and the direct participants in the ETS. Do the Government believe that that buyer-seller balance is likely to continue or do they expect to see greater equilibrium in the market?

My second point on the emissions trading scheme is to do with how long it will remain in operation. As the right hon. Gentleman said, the European Union scheme will come into effect as early as 2005. Commissioner Wallström seems set against permitting variations between emissions trading arrangements in different EU countries once a pan-Community scheme has come into being. Does the Minister envisage a transitional period to allow participants in a UK scheme to move over to the rules of the EU scheme? How will permits that companies have bought in the market under the British trading scheme be carried over to the EU scheme; or are buyers of British emissions permits taking a financial risk because the permits will cease to have value when the European scheme comes into existence?

My third point is that, as I understand it, the EU directive will make emissions trading permits mandatory for designated large industrial installations, but will also allow member states a certain amount of freedom to extend permit trading arrangements to other categories of enterprise. Do the Government want to take advantage of the freedoms currently allowed under the draft directive? Given the point made by the hon. Member for Sherwood (Paddy Tipping), a relevant example would be for us to look into some sort of methane trading system. That might cover the coal works problems to which he referred, as well as dealing with landfill methane emissions, and could give landfill operators a further incentive to reduce the amount of material that they put underground.

That leads me to the provisions in the first part of the Bill for allowance trading arrangements for biodegradable municipal waste. My problem with the Bill has—to be fair—been acknowledged by the Minister. I am not concerned about the content of the Bill as such, but about the fact that it is difficult to judge its overall impact on waste policy more generally, especially in the absence of the Government's response to the strategy unit's report. We do not have an overall statement as to how the Government propose to respond not only to the landfill directive but to the plethora of European directives that will influence how the UK deals with different waste streams over the next five to 20 years.

As the Minister said, household waste in Britain is increasing at about 3 per cent. a year. It is rising even faster than the Chancellor of the Exchequer's predictions for economic growth, let alone the actual rate. Eighty per cent. of our household waste goes into landfill. I have to acknowledge that successive Governments have found that situation hard going; they found it easier to set recycling targets than to deliver them in practice. Furthermore, the performance of local authorities varies hugely: some are taking great strides and recycling greater proportions of their waste, while others are failing to do so. The strategy unit concluded that there is a major and growing gap between waste produced, the amount of waste sent to landfill and the amount allowed under the landfill directive.

A reduction in the amount that we send to landfill is a worthwhile objective. After carbon dioxide, methane is the second most important greenhouse gas. A quarter of Britain's methane emissions come from landfill and I understand that the UK accounts for no less than 15 per cent. of all methane emissions in the European Union. As all Members know from their constituents, landfill is an unpleasant solution for people who live either near the tip or along the routes—road or rail—by which the waste reaches the landfill site.

The puritan in me—and, no doubt, in other Members—is offended by the wastefulness of chucking away large amounts of raw material that could be reused. The European landfill directive will certainly prompt swifter change than would have occurred if we had been left to our own devices. Nevertheless, I am concerned at the prospect that both national and local government policy may be driven more by the need to avoid fines for breach of the directive than by finding the best way forward, and at the right pace, for reducing and properly managing waste in the UK context. I also regret that the Bill is not accompanied by a comprehensive waste management strategy that considers landfill in the broader context. There may be an opportunity on another occasion to debate the many different illustrations of the complexity of waste policy, such as the rules that are being introduced on tyres, the end of life vehicles directive, the new proposals on packaging waste and a possible directive on batteries that is being considered by the Commission. I want to give two such illustrations.

The first, incineration, was mentioned by several Labour Members. We need a rational debate about incineration. It is certainly hugely unpopular with people who are told that an incinerator is planned for their neighbourhood, but there will always be some materials that require incineration. Countries such as Sweden and Denmark, which have a reputation for being extremely committed to green environmental policies, incinerate very large quantities of their waste. In Denmark, more than half of all waste is incinerated. That said, there is an extremely strong case for arguing that no new incinerator should be allowed unless it also allows the recovery of energy. There is also a strong case for arguing that we should be wary of large-scale incinerators that end up relying on vast quantities of waste being transported over huge distances for 24 hours a day, seven days a week, to keep the furnaces going. Incineration is a complex policy issue to resolve.

Mr. Drew

Does the hon. Gentleman recognise that the contradiction at the heart of the waste problem is that unless individuals and families are prepared to take personal responsibility for creating less waste, we are all on to a loser? The basic problem with incineration is that it requires scale. If that scale goes against the proximity principle, no individual will take responsibility. That is where the problem of incineration really lies—it is somebody else's problem and there is no personal responsibility.

Mr. Lidington

The hon. Gentleman makes a reasonable point. What worries me, though, is meeting councillors who tell me that they now see incineration as the only way in which they will be able to deliver in time the reduction of landfill use that is required if they are to meet the Government's targets, which flow from the target arrangements in the European directive.

Norman Baker

I agree with the thrust of the hon. Gentleman's arguments so far. Will he accept my view, which is that the Bill tends to put incineration on a level playing field with recycling and composting, notwithstanding the Minister's hierarchy? The landfill tax is the only tax that discriminates. Would it not be helpful if there were financial disincentives for incineration?

Mr. Lidington

The hon. Gentleman is right. The key point is that we need to consider landfill, recycling and incineration together. The Bill, by omission, makes an artificial distinction between different methods of waste disposal and the incentives or penalties that we would wish to associate with them. They should be considered strategically together, which the Bill fails to do.

My second illustration concerns the new rules that are being introduced on the separation of waste. Recycling will work only if there is effective separation of different categories of waste material. Within a few years, we will face the waste electrical and electronic equipment directive, which will require everything from television sets to electronic greetings cards to be dealt with separately from other household waste streams. New definitions and new rules for the disposal of hazardous waste are being introduced, which will also impose further duties on local authorities. I would be interested in the Government's assessment of how those rules will interact with those inherent already in the landfill directive. Have the regulatory impact assessment and the costs to local authorities of implementing article 5 of the landfill directive been underestimated because we have not yet added into the sum the further duties that may be imposed on them by the WEEE directive and the hazardous waste regulations?

Paddy Tipping

The hon. Gentleman makes some important points about directives. Does he accept, that the way that this House and the Government deal with European directives is not satisfactory? Our legislation is now driven from Europe, we have made bad mistakes, and we can improve, but it is incumbent on us to look more closely at the way that we handle and consider directives.

Mr. Lidington

I agree wholeheartedly with the hon. Gentleman. To show that I am speaking in a genuinely bipartisan fashion, I will tell him that I spent my first five years in the House serving on one of the European Scrutiny Committees, and I know that the problems of which he speaks are not new to the present Administration. I remember learning a great deal on that Committee by studying the example of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), as she interrogated a series of Ministers of the then Conservative Government about why they had signed up to this or that detail of various European directives. As he will understand, this subject is worth a long debate in its own right, and I shall not go further into it now. I agree with his general point, however.

I want to return to the point made by the hon. Member for Stroud (Mr. Drew) in his intervention. He was right to say that the success of recycling in particular, and, therefore, indirectly, the success of a tradeable allowances scheme, will be delivered only if individuals feel that they can take ownership of this matter for themselves and that they have some vested interest in a desirable environmental outcome. It also relies on two further things: on local authorities having the capacity to sort and recycle more waste than they do at present; and on the private sector coming up with a profitable end use for recyclates. Otherwise, we will collect, sort and recycle and end up putting the recycled materials back into the landfill tip, because we cannot find an economic end use for them.

Some important questions arise out of this Bill in relation to the impact on local authorities' costs. To start with, there are the administrative costs of setting up and running the scheme, which the Local Government Association estimates to be in the order of £15 million nationally. Subsequently, there are far greater costs, which the Minister acknowledged indirectly in his remarks about the need for large-scale new investment in recycling capacity: the costs of installing and operating recycling facilities that do not exist at the moment.

It is not good enough for the Government to argue, as they seemed to do in the other place, that local authorities have plenty of money with which to deliver those objectives. The money comes to local authorities from two sources. The first is the national waste management and recycling challenge fund, which has helped a number of local councils but has rejected bids from others, and all local authorities are at risk of financial penalties under the landfill directive. The other source of funding to local authorities is via the environmental, protective and cultural services block of local government finance. That, of course, must also cover such matters as flood protection, coastal defence and emergency planning, all of which are under considerable pressure at the moment, and are areas of local government responsibility in which councils are being urged by the Government, and by others, to spend more money rather than less.

I want to make three suggestions to the Minister about finance, and I hope that they will be constructive. First, he should hypothecate any revenue from fines back to local authorities to allow improvement to their collection and recycling services or to the private sector as an incentive to develop markets for recyclates further. Secondly, he should consider doing the same thing with the increased revenue that the Government plan to raise from their proposed large increase in the landfill tax. It was interesting that Lord Whitty seemed to suggest in the House of Lords that the Government were considering such measures, although he declined to be drawn on the detail.

My third suggestion is for the Government to give local authorities the freedom to offer incentives to householders who reduce their waste and sort recyclable products. Incentives will probably work better than penalties, which deals with the point raised by the hon. Member for Stroud. If people risk facing a penalty, they will be tempted either to fly-tip their rubbish or to place it surreptitiously in their neighbour's bin. If people were offered an incentive such as a small council tax rebate, they might be tempted to follow good practice.

Dr. Whitehead

I was interested to hear the hon. Gentleman suggest using incentives rather than padlocks on wheelie bins. In the light of his remarks about hypothecation, will he tell the House whether he would support the recent changes to the administration of the landfill levy set out in the pre-Budget report, which will place tax forgone into the realm of larger recycling and reuse schemes rather than into the present system?

Mr. Lidington

We will want to examine the Government's proposals in detail and especially in the light of what the Chancellor of the Exchequer proposes in a few weeks' time. I was outlining the principle that if the extra revenue that the Government are committed to take from the tax increase is to produce the benefits that they claim, it must be ploughed back into recycling capacity and markets for recyclates. Otherwise, they will take more money in tax without improving recycling rates.

I want to ask the Minister about a couple of the more technical aspects of the Bill that we will want to explore further in Committee. First, several hon. Members talked about the relationship between waste collection and waste disposal authorities in a two-tier system. The Bill provides for a county council to be fined if a district council fails to separate waste effectively. The Lords sensibly amended the Bill by inserting a requirement for a joint municipal waste strategy. However, there is still a question of whether the waste disposal authority—the county council—should be able to impose penalties on a district council that does not do its job correctly. We shall want to debate that in more detail but I should be interested to hear the Government's intended approach to that.

Secondly, there is the question of the relationship between the Department for Environment, Food and Rural Affairs and the devolved Administrations in Scotland, Wales and, possibly again in future, Northern Ireland. My understanding is that under the directive, the United Kingdom collectively will be fined if European targets are not met. Clause 9 provides for fines to be shared out within the UK as a whole if collectively it breaches its landfill targets in the target years. I was not certain from the Minister's opening speech whether the fines for a failure in one part of the UK would have to be borne by it or whether, for the sake of argument, a failure by England to deliver on its landfill targets would have to be picked up by Scottish, Welsh and Northern Irish taxpayers as well.

That is an important point because, as the Minister said, Scotland and Wales have the freedom to design their own schemes. The last note that I read suggested that the Scottish scheme would involve tradeable permits which, however, would not be tradeable across the border. It also suggested that the Welsh scheme might not allow the trading of allowances at all. The different parts of the United Kingdom will design their own schemes, which may or may not be equally effective. Do the Government believe that the ineffectiveness of a particular scheme means that the entire UK will breach its targets and become liable for the failures of the scheme in one of its component parts?

We look forward to exploring the Bill in detail later. We have reservations, not so much about its content but about the fact that it is being considered in isolation, separate from broader questions about climate change and waste management policy. If it makes a constructive contribution to delivering good environmental outcomes, we shall not oppose it, but shall do our best to make constructive criticisms and give overall support.

3.57 pm

Mr. David Kidney (Stafford)

This is a good little Bill. It provides for a trading scheme for local authorities that dispose of waste, so that they can trade allowances for the disposal of BMWs—biodegradable municipal waste, not the upmarket motor car. It also provides for penalties to support the existing voluntary scheme on trading in carbon emissions.

The Bill should not be mistaken for, nor misrepresented as, the sum total of the Government's strategy to reduce, reuse and recycle waste—it is but one part of a much larger whole. The Government's waste strategy, published in 2000, set out a number of other strategies, including the use of targets; the landfill tax; changes to the landfill tax credit scheme, which are about to be introduced; the waste minimisation fund, the first round of which has just been distributed; and public campaigns to raise awareness and support among the public, most noticeably the "A re you doing your bit?" campaign.

I pay tribute to my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) for steering her private Member's Bill—the Municipal Waste Recycling Bill—through its Second Reading in the House last Friday. That Bill provides for greater kerbside collection of household waste by local authorities, thereby adding another element to the overall waste strategy that we ought to consider. I agreed with the Select Committee on Environment, Food and Rural Affairs when it called for strong leadership, bearing it in mind that the Government's strategy has many complex elements. Strong leadership is clearly important to pull them all together, drive them forward and make sure that they are successful.

I am pleased to tell the House that I have been close enough to the Department to be able to assure it that the Secretary of State and the Minister for the Environment are ready, able and willing to provide that leadership. Indeed, the whole ministerial team and the top management at the Department show a deep and abiding commitment to making a success of the Government's waste strategy.

The new waste trading scheme in part 1 will probably be the first such scheme in the world. Trading in allowances can contribute to driving up the performance of waste disposal authorities. Currently, their performances show a surprisingly large degree of variation, by which I mean that some are pretty poor. The scheme will apply to biodegradable waste. Total UK waste is about 400 million tonnes a year. About 30 million tonnes is municipal solid waste, 60 per cent. of which is biodegradable. So although it is true that the Bill deals with a sizeable proportion of all municipal waste, it deals with only a modest proportion of the country's total waste, hence the need for an overall strategy. Of course, a much bigger proportion of our country's waste is produced in the private sector, although in fairness, the best in that sector are doing better than the best of our local authorities in their duties of reducing, reusing and recycling.

We could try to increase the proportion of municipal solid waste that is biodegradable. As the Minister knows, I have asked parliamentary questions about increasing the use of biodegradable materials in goods packaging, in place of the plastic packaging that we quickly remove and discard. For example, I am very interested in the use of a substitute for plastic bags that has been developed from potato starch. Our farmers are desperate for alternative uses for their land, and nonfood crops are a very good way in which they can diversify and obtain new areas of business. Some supermarkets are already voluntarily trialling plastic bags made from biodegradable material. We should give every encouragement to such developments.

As we have discussed, in many parts of the country—including shire counties such as Staffordshire—the waste disposal authority is different from the waste collection authority. In Staffordshire, the county council is the former, and the various district councils are the latter, so it is not surprising that the Local Government Association is asking what mechanisms are planned to ensure that co-operation between different councils actually happens. After all, a waste disposal authority that sends to landfill biodegradable municipal waste that is not covered by allowances will be fined. What will happen if Staffordshire county council is fined for behaviour that is the fault of a district council?

On co-operation between councils, I pay tribute to John Dutton, chief executive of the Staffordshire environmental fund, which is one of the funding bodies under the existing landfill tax credit scheme. He had the foresight to bring together all the councils in Staffordshire to look at the key issues in co-operation over waste disposal. Together, they have looked at stimulating markets for reusable and recycled goods—an issue raised by the hon. Member for Aylesbury (Mr. Lidington)—and examined the scope for closer co-operation between councils, thereby presaging the amendment from the other place on joint municipal waste strategies. They have also considered developing waste parks, in which multi-activities such as sorting, recovering, reusing, recycling, processing and product development could all take place—in the same place, at the same time.

I have a constituency interest in knowing to what extent the Government intend that advanced conversion technologies such as pyrolysis and gasification will contribute to the policy of reducing landfill. This is not incineration—the process that gives rise to people's health fears—but an energy recovery method that is often associated with reducing biomass into a renewable energy source. I raise the point because a very enterprising company in my constituency, Talbotts Heating, is something of a world leader in this conversion technology. The Minister may remember that, during his recent visit to Yorkshire to give out awards for the Country Land and Business Association, Mr. Bob Talbott, of Talbotts Heating, bent his ear. He is an enthusiastic entrepreneur, and keen to help Staffordshire to reduce the waste that goes to landfill. But Staffordshire county council—the waste disposal authority—is under the impression that the Government favour recycling over conversion, so it is reluctant to co-operate with his company. I should be grateful if my right hon. Friend could clarify in his response to the debate, or later in a letter to me if that is more convenient, whether the county council's understanding is right.

I have a letter from the council on the matter, a crucial part of which explains its position and states: The current priority is to increase the recycling of waste to improve performance under national Best Value Performance Indicator BV82a. In this respect incineration is not classified as recycling. Consequently the incineration of materials which are currently being recycled would make the Council's performance under BV82a worse, not better. Clearly, the council classifies even the kind of energy conversion that I am describing as a form of incineration. That is why I ask the Minister for his view.

Part 2 relates to emissions trading. Surely all fair-minded people will give the Government great credit for that. Let us recall the background. The UK was a leading player in making the Kyoto process work. For the first time, the world's leading nationsߞwell, most of them—agreed legally binding targets for reducing carbon emissions to combat climate change. Within the European Union, we took a good proportion of the EU's target reduction as our share of the obligation to reduce emissions of greenhouse gases. Domestically, we went further and adopted an even more challenging target for ourselves. Not content to rest on our laurels, the Prime Minister made a most impressive speech recently, urging us on to an even more demanding target by the middle of the century.

In the follow-up to Kyoto at Marrakesh, the participating nations agreed that achievement of the targets for reductions in emissions could be aided by, among other initiatives, an emissions trading scheme. Once again, the UK has acted first. We have become the first state to introduce a trading scheme. It is a voluntary scheme, but it is being taken up by a wide variety of organisations.

For example, Barclays Bank was one of 34 companies, and the only financial services sector representative, to volunteer to become a direct participant in the scheme when it was launched last year. Barclays has taken on a commitment to reduce by 10,000 tonnes over five years CO₂ emissions from a portfolio of 83 large properties bid into the scheme. That equates to a reduction of about 11 per cent. in emissions from its buildings.

The hon. Member for Aylesbury asked whether that was what the company had already planned to do. That is a good point. Quizzing Barclays Bank about its boastful claim, I was told that the company already had an environmental management strategy of its own, under which it had intended to achieve a reduction of 10 per cent. in the same period anyway, so we have bought an extra 1 per cent. That illustrates the difference between targets and aspirations. It is fair to say that in the past, Barclays Bank would have aspired to the 10 per cent. reduction, but because of the financial penalties, it intends to meet a rather tough commitment to 11 per cent. It is sharpening up its environmental management, as are all the other participants, I expect. That is important because carbon emissions from business activity are probably proportionately very big, as is the waste that I mentioned earlier.

Mr. Jonathan Sayeed (Mid-Bedfordshire)

I have heard a slightly different story. British Airways made some money out of the Government by doing what it intended to do anyway, by selling off part of its air fleet, particularly the budget side. It got money from the Government because British Airways thereby reduced its emissions, but it did not reduce the emissions overall. All that happened was that another company took up that fleet, ran the budget airline and produced the same emissions. That does not seem to be the best use of public money.

Mr. Kidney

Clearly, that is why the hon. Member for Aylesbury raised the question for the Minister to answer when he winds up. I suspect that the airline industry is not a good example for us. Nevertheless, in defence of the private sector companies taking part, I would say that from the scheme has flowed a greater appreciation of their responsibilities. To mention Barclays one last time—it was an excellent dinner, after all—it has a presence in something like 60 countries around the world, and its environmental strategy that started in the UK is now applied across virtually all those other parts of the world. We are exporting very good practices, which is encouraging, to say the least.

The new trading scheme could not be described as tough if there were no credible sanctions for the participants. The Bill introduces the fines that will be levied if participants fail to comply with their commitments under the scheme. So here are two new trading schemes. In both cases, the UK leads the world. Of course, being the leader means that there is no template to follow, and we might not get everything right first time. In regard to the emissions trading scheme, the European Union is developing an EU-wide scheme that might require changes to be made to our scheme.

Taking those things into account, it should not be surprising that the Bill has to provide for future changes in certain respects, some by statutory instrument, others by ministerial power. In respect of the powers to make changes, I would like to make a plea for the involvement of the Select Committee. I am not a member of the Committee, so this is not special pleading. The modern legislative process is complex and time-consuming, and not everything can be achieved by primary legislation. The House should be involved, however, in the exercise by Ministers of the powers that we grant them. What better way is there for that to happen than through our well-developed system of Select Committees? I congratulate the Government on their enterprise in developing these trading schemes, and I wish them well in making a success of them.

4.11 pm

Norman Baker (Lewes)

I am happy to follow the hon. Member for Stafford (Mr. Kidney). I agree with his last point about the Select Committee. Indeed, this is one of those pleasurable occasions on which there is a good deal of agreement on both sides of the Chamber. The Liberal Democrats support the Bill, and I do not imagine that there will be a Division tonight, but if there is, we shall support the Government in the Lobby. That is not to say that everything about the Bill is perfect, butߞcredit where credit is due—its principle is absolutely right and the Government are ahead of the game in using economic instruments in this way.

The use of economic instruments throws up a potential problem, although it is definitely right to go down that road. In a different capacity, I remember being in a room with Chris Patten back in 1989, when he was involved with the Pearce report, which looked for the first time at the use of economic instruments in an innovative way. I was sorry that the work that he did seemed to run into the sand two or three years later, because there was an opportunity then to grasp the importance of merging the economy and the environment.

I seriously believe that. if we are to make good progress on the environment, we must do so in conjunction with economic instruments—which means, effectively, in conjunction with the Treasury. I am not sure that the mechanisms of government would allow us to do that effectively, however. We have, necessarily, a straitjacketed departmental arrangement whereby Departments do not always talk to one other. They have their own responsibilities, they build their own walls, and they have their own jealousies, which they guard. I sometimes think that, with the changes that are now taking place in government, some of those barriers could be broken down.

I represented my party this morning on a statutory instrument Committee on the climate change levy. My party had decided that I should be there because that was an environmental matter. The Government and the Conservative party were, understandably, represented by a Treasury Minister and shadow Minister. The discussion was on financial matters and was very dry and arcane, and there was not much said about the environment, although the implications of the climate change levy are enormous for it. We need to find a way of having more effective cross-departmental working. I know that the Minister has started his Green Ministers Committee, which is helpful, hut not necessarily enough.

I do not want to stray too far from the Bill, Madam Deputy Speaker, but let me just make this point. We have discussed combined heat and power, which is covered by the Department for Environment, Food and Rural Affairs. The rest of energy is covered by the Department of Trade and Industry. and the Treasury is the Department that was running the show this morning. Directives that are clearly germane to the Bill and to the Government's waste strategy, such as the packaging directive and its amendments, and the waste electronic and electrical equipment directive, are being snaffled by the DTI rather than being dealt with by the Department that I think should be dealing with the—DEFRA. I am not convinced that the mechanisms are helping the Government to deliver their own agenda, and I hope that that can be looked at.

I agree with the hon. Member for Aylesbury (Mr. Lidington) that the Bill is like the dog that did not bark in the night. It is what is not in the Bill that is disappointing, rather than what is, It would certainly have been helpful to have the Government's response to "Waste Not, Want Not" before Second Reading and indeed before the Committee stage. I do not know whether the Minister can give us definite date, but obviously the sooner we have a response, the better.

Mr. Lidington

Budget day?

Norman Baker

Quite possibly.

It would also be better if we had a waste management strategy or, as I prefer to call it, a resource management strategy. This is only one part of the equation, and until we are confident that the rest of the jigsaw fits together, we cannot be confident that the Bill will deliver the Government's aims. There is, for instance, nothing about incineration in the Bill apart from ancillary references, and nothing much about fly tipping, waste minimisation and a host of other matters that should be considered together if we are to deal with waste in a sensible and co-ordinated way.

The Minister was honest enough to say—he is always honest about environmental matters, and doubtless about other matters as wellߞthat we have a long way to go. Not only our waste arisings but our landfillings are increasing: recycling is not catching up with the increase in the amount of waste. That is a silly situation for us to be in environmentally, in terms of the Government's meeting of the targets in the European landfill directive. The Minister is right to draw attention to those facts and to say that drastic action is needed, and I think that the Bill responds to the challenge; but I am not convinced that it will achieve what it seeks to achieve.

Is the Minister seeking to achieve compliance with the landfill directive in 2016 or in 2020? There seems to be some uncertainty about that. On 24 February, when I asked him about the matter, he said: preparations are in hand to support our aim of meeting the Landfill Directive's final biodegradable municipal waste reduction target by 2016."ߞ[Official Report, 24 February 2003; Vol. 400, c. 91W.] Clause 23, however, refers only to implementing the directive in 2020. I am not sure whether it is an escape clause in case the Government undershoot by four years, or whether the Government are banking on a 2020 implementation and 2016 is merely a theoretical target.

I do not intend to repeat everything that has already been said by others, including the Minister, but I would like to mention some issues that have not been raised in the Bill or in much detail today. I have already referred to penalties in an intervention on the Minister. I am not sure whether the penalty system will work, although I hope that it will. Waste disposal authorities are having to deal with the increased waste arisings, but the Bill expects them to have the same amount of waste landfilled in the first year of the Bill's operation as in the year before. There is thus an immediate target to be met, and I am not sure that local authorities are up and running in that respect. Despite the best endeavours of many of them, and the exhortations of the Government and others, we are still lagging behind other countries with only a 12 per cent. recycling rate, and no indication that it is rising fast enough to deal with the situation.

There is therefore a real possibility that, in the first year, a huge number of local authorities will fail to meet that immediate target. They will not be able to cope with the extra waste being created by the 3 per cent. annual increase in waste arisings. If most do not meet the target, not many will have permits for sale; they will all be clamouring to buy them. But where will they buy them? If only a few authorities manage to meet the target, the price of permits is likely to be highߞeven astronomical. I cannot envisage local authorities giving them away, although that is allowed for in the Bill. Authorities in possession of a piece of paper with some value will want to redeem that value by selling it.

If the price of permits is indeed high, authorities may wonder whether it is better to default and face a penalty or to pay an enormous amount for a permit. If they choose to default and pay a penalty, it will reduce the amount of money that local authorities have to spend on recycling, and that could start a vicious cycle that would make it less likely that they would meet their targets in future years. The Government might have to use the power in clause 26(1)(c)(ii) which gives the allocating authority carte blanche to waive penalties. The allocating authority might have to say, "We accept that most waste disposal authorities do not have permits to trade and the price is very high, so we will waive the penalty." In that case, we would have made no progress and the trading scheme, which I support, would be undermined at an early stage.

The market will need to workߞif it does, we will welcome itߞbut the initial trading is the most difficult to achieve. The market will work only if the targets effectively enable local authorities to take action to meet them. If they cannot meet those targets, the market system will collapse. The Local Government Association has already said that it has some doubts about the initial phases, not least because some local authorities will rely on incineration. If they do, they will need public inquiries, planning permission and long lead-in periods for building. East Sussex is running away, I am sorry to say, with an attempt to build an incinerator in my constituency. It has even signed the contract before the public inquiry takes place, which must be something of a record, but even with that accelerated time scale, the incinerator will not be operational until 2009. I am not sure how the Government's targets can be reached, because it will be very difficult to do so.

Some extra money will have to be provided to local authorities, at an early stage, to enable recycling, composting, reuse and waste minimisation to take place and the targets to be metߞeven half met. Local authorities face huge council tax increases this year. I do not understand that, because the Government say that they have given every authority an inflation-plus increase and they are all better off. However, every authority in my area, whether Conservative, Labour or Liberal Democrat, appears to have a massive tax increase, so I do not understand how the system has workedߞor not worked. In any case, local authorities do not have lots of money to spend on such schemes.

The landfill tax, which is going up on an escalatorߞif that is not a dirty word in the Treasury these daysߞis not going up fast enough. It can still be more expensive to recycle than to landfill. For example, I visited a siteߞit may even have been in the Minister's constituencyߞwhere they were trying to recycle windows from a tower block that was being demolished. The local authority had to choose between paying £9 to recycle them or £5 to landfill them. There is, therefore, a perverse incentive to landfill at the moment, although the landfill tax will increase over time. It will cost local authorities more to act in an environmentally responsible way, at least in the short term, than to be irresponsible. That cannot be right. We need some early financial changes if we are to increase recycling and if the market system is to work. Otherwise, the Minister and the scheme will soon face problems, which would be regrettable, especially as it is a good scheme in principle.

I am not an expert on Northern Ireland, but it is difficult to see how cross-border trading could take place. Local authorities in that area might have arrangements to dispose of their waste in the Republic, and I am not clear about how that fits with the UK's target under the landfill directive and what allowance will be made for exports of waste from Northern Ireland to the Republic. I do not know whether that has been taken into account or whether it is banned. I profess myself ignorant on that issue, but it needs to be sorted out. Perhaps the Minister will be able to answer when he replies.

I turn now to incineration, which has been raised by several hon. Members, including the hon. Members for Stoke-on-Trent, North (Ms Walley) and for Stroud (Mr. Drew). The Minister may have failed to understand the point to do with clause 17(3) made earlier by my hon. Friend the Member for Guildford (Sue Doughty). The Minister spoke about the waste hierarchy. He is clear in his own mind about what it is, as I am, but in practical terms it means that landfill is at the bottom of the pile, with everything else above it. The Bill does not make the necessary differentiation.

Clause 17(3), which deals with waste that should have gone to landfill being diverted, states: The measures mentioned in subsection (2) include (in particular) measures to achieve the targets by recycling, composting, biogas production, materials recovery or energy recovery. There is no difference, separation or hierarchy in that: all options are treated equally. Local authorities are now faced with a requirement not to landfill, and there is a genuine uncertainty about whether they can meet their communities' recycling aspirations. I am worried that they will opt for incineration. The hon. Member for Aylesbury referred to the genuine concern and fear of local authorities that there is no way to meet the targets without incineration. That is what local authorities around the country have told meߞand, apparently, the hon. Member for Aylesbury—yet the Minister maintains that incineration will be only a small part of the solution and that it will not be used much at all.

I do not think that that is the case. Unless the Minister takes action to incentivise recycling, reuse and waste minimisation, and to disincentivise waste incineration, incineration will become the preferred solution for waste disposal authorities up and down the country. They will go for incinerators, because they offer an easy way to deal with big percentages.

It is much easier for an authority to sign a contract with a private company that promises to deal with 25 per cent. of that authority's waste in one big hit than it is for it to deal with myriad complicated schemes that will take time to sort out. Al though the different ways that such schemes may deal with that 25 per cent. of waste may be preferable, they would be much more complicated. Faced with a succession of small schemes or one big scheme, I fear that local authorities will go for the one big scheme, unless the Government produce incentives for them to do otherwise.

We all know the problems with incineration. They go beyond the emissions problem, which I think is overblown. Incineration diverts the waste stream away from recycling, ties local authorities into very long contracts and involves substantial transport movements. Also, the incinerators themselvesߞwhich are big beastsߞblight the local landscape.

Incineration undermines the proximity principle, on which the Minister is very keen. So am I, but the principle does not apply if one local authority can send the waste that it generates a long way away by lorry to be incinerated somewhere else. Where is the link then between the waste producer and the waste disposal? There is no link. Authorities can use incineration to put waste out of sight and out of mind. They have no incentive to recycle or deal with waste themselves. The hon. Member for Stroud said that the desire to deal with waste should be engendered in people, but that is undermined by incineration. Incineration is not available on the doorstep, unless one is very unlucky. People in Newhaven in my constituency may be unlucky if the county council has its way and puts an incinerator there. Incidentally, the proposed site is next to the national park, on which the Minister is also very keen.

Incineration is immensely unpopular. Local authorities are caught between a rock and a hard placeߞthey do not want incineration, but feel that they have to have it. However, local communities are up in arms whenever it is proposed to build an incinerator in a particular area. We need to disincentivise incineration. We need an incineration tax, to put it more on a level with landfill and to make local authorities look seriously at the alternatives. If such a tax is not forthcoming, there will be incinerators all over the country, and we will not have the recycling that the Minister wants.

We also want the Bill to contain an approach to fly tipping, an issue that is germane to the Bill. As we increase the price of landfill and make it more difficult to deal legally with waste, the tendency will be for more and more waste to be thrown away in our countryside and towns. This must be looked at in parallel with the Bill. If not, we will find more and more waste strewn across the countryside. A parliamentary answer to me on 4 March from the Minister provided me with an astonishing statistic: the amount of material fly-tipped in the countryside in 2001 on agricultural land was 600,000 tonnes. That will get worse and we must deal with that in parallel.

The Bill is a good idea and the Government are moving in the right direction, for which they deserve credit. They are right to use economic instruments to try to achieve environmental ends, but there are problems that I have identified, which I hope that the Minister will take seriously, because I want the Bill to work, as he does.

4.31 pm

Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East)

The Bill is far reaching and I warmly welcome it. The management of waste is becoming an increasingly vital concern for all our communities. Excessive waste is becoming more and more of a problem for society as a whole. I want to refer to the impact of the Bill on my region and to highlight in particular the Teesside waste-from-energy plant to which the hon. Member for Aylesbury (Mr. Lidington) referred.

My right hon. Friend the Minister said that the 2000 waste strategy had a waste hierarchy, which boils down to three simple things: reduce, reuse and recover. They are all perfectly sensible ideas. By minimising the amount of waste produced by reducing the packaging, there is less waste to reuse, which is the next best option. Finding an alternative use for waste or alternative owners for goods regarded as waste by the current owners can also lessen the amount of waste that needs to be disposed. Finally, recovery is the next best option.

Waste of different types can be separated out and reduced to its core components for use in the production of future products and goods. That includes the incineration of waste for energy recovery.

There are varying forms of each of the options, but the essential difference between them and landfill is that within each process there is something positive to be gained from what has been traditionally regarded as rubbish; waste is used in one form or another to replace other materials, thereby conserving natural resources. The fourth option, and the exception to this, is disposal, of which landfill is only one option. I can think of few people who believe that burying rubbish is the best way to dispose of waste. Imagine if we did that in our daily lives, burying travel tickets, crisp packets and tissues. People would think we were mad, but that is what we do every day in landfill sites across the country. So reducing landfill is good and I welcome the decision to place the onus on local authorities to reduce the amount of biodegradable municipal waste sent to landfill, but I do so with a caveat to which I shall return.

On virtually every measure, landfill is the worst method environmentally. According to a recent Library paper, the UK produces 400 million tonnes of waste annually. Of this, 29.3 million tonnes is municipal solid waste, most of which is disposed in landfill. Currently, the area covering the former Cleveland county council handles approximately 310,000 tonnes of municipal waste from Teesside. Some 240,000 tonnes per annum are handled at the Teesside energy-from-waste facility.

One of four local authorities in the Teesside area—Redcar and Cleveland borough councilߞdisposes of about 52 per cent. of municipal waste via waste to energy and 49 per cent. to landfill. The local landfill site, Carlin Howe farm, is based in Dunsdale, near Guisborough in my constituency. The north-east regional assembly prepared a consultation document last month. It plans for the waste recycling and disposal needs of the four boroughs currently partnered through existing waste management and disposal plants and sites.

For Redcar and Cleveland, the targets set out propose to increase the current total percentage of tonnage of household waste sent for composting. It is set to rise from 0.62 per cent. to 4 per cent. by 2005–06 by the introduction of the kerbside collection of garden household waste. The pilot scheme begins in Saltburn in my constituency next month. If successful, it will then be extended throughout the rest of the borough.

Similarly, the total tonnage of household waste that has been recycled currently stands at 8.4 per cent., with proposed targets of 14 per cent. by 2004–05, 18 per cent. by 2005–06 and 20 per cent. by 2006–07. For an area that currently ranks bottom in the recycling stakes, these targets mark a cultural change locally. The north-east currently holds the title for the fewest households served by kerbside recycling, and the lowest percentage of household waste recycled. Nevertheless, the commitment of the local authority and the recent award of £600,000 from phase one of the Department for Environment, Food and Rural Affairs' waste minimisation fund are enabling the construction of two new recycling centres. One is to be co-located with and linked to the region's existing incineration site. I hope that my right hon. Friend will acknowledge this approach and commitment to integrated waste management in his summing up.

From listening to the debate, I know that serious criticisms have been made of incineration, but I want to say a few words about incineration on Teesside. The figures available on the Department of Trade and Industry's website show that, at the moment in the UK, about 2.5 million tonnes of waste a year are being used to fuel 180 MW of power generation. That is enough for 250,000 homes. The Cleveland-based Teesside energy waste plant incinerates 240,000 tonnes a year of municipal solid waste. It then uses the energy generatedߞaround 20 MW of electricity and more than 10 per cent. of the national totalߞto meet the heating and power needs of 40,000 homes.

Although I am aware of the benefits of incineration, I am also aware of the concerns that have been expressed. Environmental organisations and many hon. Members have expressed concern about the environmental impacts of major installations, such as waste management and energy generation plants. However, technology has improved in leaps and bounds. Sites such as the Teesside energy-from-waste plant can now employ proven clean-up systems, based on lime and carbon injection and dust filtration, to ensure that emission limits are met. If we add to that the lack of notices served by the enforcement authority responsible for monitoring environmental performanceߞthe Environment AgencyߞI do not think that it is an overstatement to say that incineration is as clean a waste management and disposal method as most others.

Following the implementation of the incineration directive, the amount of emissions that the plant is allowed to make are extremely low. Virtually everything except for fly ash is recycled in some way. That site includes a bottom ash recycling plant for ferrous and non-ferrous metals.

Thanks to the non-fossil fuel obligation commitment to more sustainable energy, incineration is a significantly cheaper form of disposal. With the addition of the landfill tax, the scales will weigh even more heavily in favour of alternative waste disposal methods.

Although I warmly welcome the Bill, I have some outstanding concerns that I want to raise with my right hon. Friend the Minister. The contract for landfill services in Teesside allows penalties to be imposed in the absence of a set tonnage being deposited regularly, yet the Bill will introduce penalties on authorities for not reducing the waste that they send to landfill. Given that the Teesside authorities send among the lowest amounts of waste to landfill in the whole UK and that they are bound by a 25-year contract to continue to send that minimal amount to landfill, what would the Minister suggest that local authorities do to prevent being squeezed financially between—I think this phrase has been used—the rock of the contract and the hard place of the Bill's penalty clauses?

I welcome the measures targeted at reducing high levels of landfill in favour of alternative forms of waste disposal. Butߞand this is a big butߞI am concerned that those authorities that are already displaying a regard for such issues may be penalised under the new regime.

In speaking to local authority waste management and disposal experts in advance of the debate, a number of other concerns and issues were brought to my attention. It was put to me that some of our European counterparts have a wider definition of the waste-to-energy processes and fuels eligible to be classified as renewable, thereby counting towards renewable targets. Is there any intention to look again at the definitions applied?

I also ask my right hon. Friend to provide an assurance that the move from landfill to recycling will not penalise the affected authorities that have already pursued alternatives to landfill. When the 2000 waste strategy was introduced, serious concerns were expressed by, among others, the Institute of Wastes Management. It welcomed the strategy, but questioned whether adequate funding will be made available to achieve the measures outlined in it.

Similarly, as has been mentioned, the Local Government Association has said that the Government need to make significant and increased funding available to allow local councils to achieve significantly greater diversion from landfill. It has also argued that the introduction of a penalty scheme will make it more difficult for waste disposal authorities to comply with landfill targets. It is worried that funds will be diverted from addressing the real challenge of providing alternatives to landfill. Despite some of the concerns that I have expressed, I strongly welcome the Bill and wish it speedy progress through the House.

4.43 pm

Mr. Jonathan Sayeed (Mid-Bedfordshire)

I thank my hon. Friend the Member for Aylesbury (Mr. Lidington) for his very kind remarks. He will be aware that I had intended to speak from the Opposition Dispatch Box. However, other major matters intervened. One of the things that speaking from the Back Benches permits me to do, however, is to be a bit more robust in some of my remarks than I otherwise might have been.

This is a useful Bill, but it is a wasted opportunity. It is extremely narrowly drawn and fails to provide a much needed comprehensive strategy for all forms of waste. It simply perpetuates the Government's piecemeal attitude to the issue. I am sorry to say that it is a testimony to their policy of serial compliance with EU directives, as and when they start to put the United Kingdom in a difficult, possibly costly or embarrassing position. The Bill is specifically time committed to deliver the landfill directive, and therein lies its overall weakness. Its scope is narrow, its vision is small minded and its provisions are inadequate. Moreover, the questions raised by their lordships as it passed through the scrutiny of the other place have been at worst ignored or at best incompetently answered by the Government.

The Government strategy unit report of last November, "Waste Not, Want Not", specifically recommends regulation that deals with the problem in a holistic manner. We should be starting at the front line of battle by dealing with the minimisation of waste, but instead we are starting at the rearguard and with its final disposal. The Bill affects and penalises local authorities in their disposal of waste, but neglects to assist them in the minimising of waste at source. Furthermore, it fails to connect with other waste legislationߞfor example, the waste electrical and electronic equipment and end of life vehicles directives. Although it is hoped that a large proportion of the waste arising from waste electrical and electronic equipment and end of life vehicles will be recycledߞand a very good thing tooߞthere will be a certain residual amount left.

If we are trying to deal with waste in a more comprehensive fashion, why is it that the Bill does not at least acknowledge the difficulties with the planning procedures, or deal with energy from waste plants and measures to combat fly tipping? The. Bill does not and will not exist or operate in a vacuum. It will have a knock-on effect on incineration and other forms of waste, including inert waste.

Already the introduction of new regulations, coupled with the need for better waste management facilities, has exacerbated the problem of fly tipping. The Country Land and Business Association estimates that the cost of clearing that up is about £50 million a year on agricultural land alone. The CLA has recommended that where waste has been fly tipped on private land and where the occupier can prove his innocence, it is for the authorities, either the local council or the Environment Agency, to be placed under a duty to remove the material. That at least would ensure an adequate cleanup and enable the scale of the problem to be assessed. Perhaps I may suggest to the Minister that fly-tipping incidents should be reported to the police and the Environment Agency and be given a crime reference number, in order to improve available data and to further promote criminal proceedings. All too often gross examples of fly tipping happen in rural and urban areas and cannot be dealt with. No prosecutions come, or when they do come, the fines are paltry.

Why is it that only biodegradable municipal waste is considered appropriate for the whole concept of trading allowances, trading surpluses and buying in of allowances by authorities that do not have sufficient funds to cope with needs? After all, biodegradable domestic waste accounts for only 30 per cent. of total waste.

The Bill also fails to reduce the transport of waste from one area to another. Clearly, the trading scheme does not imply the literal trading of waste, but some areas accept the waste of others. Indeed, my constituency has long accepted a high proportion of waste from London, owing to the proximity of Bedfordshire to London and the unfortunate existence of a multitude of cheap holes in the ground. By not tackling the situation we are ignoring the proximity principle which we all support, and we are only adding to greenhouse gas emissions.

What are the implications of the borrowing and banking of landfill allowances? The banking of permits may act as a disincentive for waste disposal authorities to improve continuously year on year and to invest in required new infrastructure. The process that is outlined in the Bill may well create a culture of disincentive and short-termism. Has any serious attempt been made to assess the total compliance costs of the Bill? At the moment, we have a two-tier system of government for the management of waste and two types of authority that will incur expenses under the Bill. However, all the obligations are on the waste disposal authority. What will be the cost, to both tiers, of implementation? How do we ensure the fair distribution of resources between the waste collection and the waste disposal authorities? What will happen when a waste disposal authority incurs a penalty for the failure of a waste collection authority to discharge its duties? The Bill also creates an incentive for the waste disposal authority to blame the waste collection authority for its own failure to meet targets. I am in favour of joined-up governance, but there may be even more difficulties if the two authorities are run by parties of different political persuasions.

From Second Reading last Friday, we know that the Municipal Waste Recycling Bill has made some headway towards an arranged marriage for waste disposal and waste collection authorities, with the production of a joint sustainable waste strategy. That strategy allows the waste disposal authority to direct the waste collection authority to collect waste in a manner that facilitates maximum reprocessing and recycling. Those provisions have been endorsed by an amendment to this Bill that was approved in the other place. I hope that a harmonious relationship will be established between the two Billsߞthe Municipal Waste Recycling Bill and this Bill. However, it remains unclear who is to pay for the enforcement of the Bill's provisions.

What will happen to money that is collected in fines? May I suggest that the Minister consider that the money should be used to assist waste disposal authorities? Although initially designed to be revenue-neutral for business, the landfill tax does not necessarily help local authorities to acquire the capital to invest in the required waste management infrastructure. In the other place, my noble Friend Lord Dixon-Smith raised the issue of the landfill increase being used directly to support local authorities to fund the capital requirements for recycling. That was rejected by the Government. However, 54 per cent. of the revenue from landfill tax is money that is paid by local authorities. It seems only right that, if the revenue were to be substantially increased, at least a similar proportion of that escalation should be recycled back to those who have to foot the bill, in order that they may be encouraged and assisted to have the plant that will reduce the amount going to landfill. There is no doubt that the gap between the funding that is available to local authorities and the need for expenditure to meet sustainable waste objectives is widening. We have to recognise that the current funding mechanisms are inappropriate. Using the increase in landfill tax in the way that has been suggested would demonstrate that it is a tax designed to help the environment rather than a tax designed to fill the Chancellor's back pocket.

If the measurement of waste were to incorporate volume as well as weight, we may further raise the sum and provide a greater incentive to reduce lightweight packaging. At the moment, the measurement is weight based only. It is therefore far more attractive for local authorities to collect heavy materialsߞsuch as newspaper, card, glass and compostable wasteߞand ignore the light fractions, which are much harder to deal with.

That brings me on to the vital issue of the safe composting of catering waste. Compost that is to be spread on the land requires proper pre-treatment to ensure the safety of animal and human health, if we are not to face yet another agricultural catastrophe. Composted domestic biodegradable waste spread on agricultural land could be a cause of another outbreak of foot and mouth disease, and the Government have not yet demonstrated that they can guarantee zero risk when compost containing animal by-products and catering waste is spread on land.

I acknowledge, however, that composted catering waste has an important role to play in helping local authorities to meet both their recycling and composting targets. I also recognise that my noble Friend's amendment, to heat selected biodegradable waste at 98°C for a minimum of two hours before storing, would have unwelcome consequences. The process would be cumbersome and more expensive, and would consume more energy, which is obviously contrary to the objectives on emissions trading in the Bill. However, like national security, biosecurity, too, must have priority.

We still do not know the exact cause of the foot and mouth outbreak, but it can hardly be denied that, with only two sniffer dogs to guard all UK ports, we cannot prevent the illegal importation of the sort of meat and meat products that may have been the cause of foot and mouth. It is absurd that municipal biodegradable waste should be treated less rigorously than pigswill. If the Minister will not accept that heating selected biodegradable waste at 98°C is necessary, will he confirm that the Government will compensate all affected farmers in the event of another foot and mouth outbreak occurring as a result of spreading compost from animal by-products and catering waste? After all, the latter will be permitted under new EU regulations that will soon supersede the UK animal by-products regulations.

My final point concerns the end use of recycled materials. Source separation secures high quality secondary resources, but it cannot be an end in itself unless there is a market for the materials. We still lack measures to support and sustain the markets necessary for recyclates, which is surprising given the market-orientated nature of both parts of the Bill. It would appear that while the Government are rightly content artificially to stimulate a market for emissions and waste permits, they are less concerned to assist a market for the constructive use of the waste materials collected. We risk defrauding the public, who will dutifully separate their waste only to have it end up in a landfill site or exported to China.

I realise that one cannot legislate to provide for a comprehensive and holistic vision, but legislation should certainly slot into a progressive and coherent framework and direction. Although I welcome the Bill, I am sorry to have to say that it is simply a piecemeal attempt to rescue the Government from their failure to meet pressing demands from Brussels. It may even be a careless and somewhat irresponsible cover-up that leaves agriculture and food production vulnerable to another disaster.

The Government must do better than that in Committee, if we are to be convinced of their real commitment to long-term planning and a robust, comprehensive waste management strategy.

4.58 pm

Dr. Alan Whitehead (Southampton, Test)

I warmly support and endorse the Bill. Unlike the hon. Member for Mid-Bedfordshire (Mr. Sayeed), I do not believe that the Bill should deal with everything. Indeed, I congratulate my right hon. Friend the Minister for the Environment on ensuring that time was obtained for the Bill in this Session. If the Bill had dealt with everything, several Sessions would have passed before all the various inquiries had reported and we actually had a Bill. Time is of the essence in taking action to reduce the amount of waste going to landfill.

Some people claim that the Bill has been introduced only to implement the EU landfill directive. Some hon. Members have suggested that during the debate. It is certainly a Bill to implement the EU landfill directive, but it is substantially more than that. Essentially the directive is a series of targets with penalties. It is clearly desirable to meet those targets, but the key question that we have to ask ourselves is how we do that.

Targets in UK waste management have a habit of not being met. The hon. Member for Aylesbury (Mr. Lidington) noted that Governments of both colours have failed to get their targeting spot on, and that is true. The environment White Paper of 1990 set a target of 25 per cent. recycling by 2000. That target was re-emphasised in the 1995 strategy, "Making Waste Work", but it was not met. The 1999 document, "A Way with Waste", recognised that and set a new target of recycling or composting 17 per cent. of household waste by 2003–04. The performance and innovation unit report states that that is unlikely to be met as performance in 2001 was under 12 per cent. The target of 25 per cent. has now re-emerged, this time for 2005–06. The PIU report states that, given current progress, that will be very difficult to achieve. So we need more than targets, and the Bill strongly achieves that.

It is vital to tackle landfill. Hon. Members have referred to the fact that we are the country in Europe that commits by fir the largest amount of our domestic waste to landfill. We are running out of holesߞnot only in Bedfordshire, but in the country as a whole. Methane escapes from landfill in a form that is 21 times as potent a greenhouse gas as carbon dioxide. It is, above all, a lazy way in which to dispose of waste. It buries millions of tonnes of material that could be used or recycled. It is absolutely right that it is right at the bottom of the waste hierarchy.

The mechanism in the Bill essentially does two things. It caps the total amount of waste going to landfill and provides a mechanism whereby it can be reduced in line with targets. It sets up a trading scheme so that local authorities that have exceeded their targets can earn income by trading permits with local authorities that have not reached their targets. As we have heard, there are mechanisms that allow local authorities to plan ahead by banking their credits or permits. Altogether, that creates a mechanism to track and to achieve targets that has real bite.

I have two questions about the effect of that mechanism. In order to answer those questions, the Bill, important though it is, must be accompanied by other measures, possibly in a legislative form. The first question relates to the relationship between waste collection authoritiesߞdistrict councils—and waste disposal authorities: counties, unitary councils, metropolitan borough councils or consortiums of various authorities. Mets and unitaries are both collection and disposal authorities. At present, waste disposal authorities are required to dispose of whatever waste collection authorities give them for that purpose. There is no clear mechanism that requires waste to be supplied in a form that enables waste disposal authorities to manage it in a way that facilitates diversion from landfill, although many better waste collection authorities already do that.

My right hon. Friend the Minister referred to a partial mechanism to resolve that issue in the Bill. I must admit that I tend towards the option suggested by my hon. Friend the Member for Stroud (Mr. Drew)—that waste collection and waste disposal authorities should move together. Nevertheless, there are mechanisms that can substantially resolve the problem. My hon. Friend the Member for Lewisham, Deptford (Joan Ruddock), who is not in her place, addressed that in her private Member's Bill, which was recently given an unopposed Second Reading. The Bill requires waste collection authorities to provide waste in a suitable form. I hope that the Government will give the Bill a fair wind through Committee.

My second question is more fundamental. It relates to the overall effect of the mechanism in the Bill on the actions of local authorities and the extent to which the outcome of those actions will bring about the required result. There is, of course, the initial problem of the quantum of the mechanism—that is, the extent to which the trading mechanism will secure the overall shape of the amount of waste that goes to landfill in the intended way. The problem, of course, is exacerbated by the annual increase in waste arising. Hon. Members have already mentioned that it is increasing by 3 per cent. per annum. The effect is that although the percentage of waste going into landfill is reducing, the total amount of waste going into landfill continues to increase.

The mechanism assumes that local authorities act rationallyߞthat they take positive actions to avert penalties that might arise from exceeding their targets, or, in the longer term, cause them to have to go into the market for permits to mitigate their position. A perverse incentive exists already for local authorities in the structure of the landfill levy. Every time that the gate price for landfill increases, local authorities pay more, which comes out of the environmental, protective and cultural services budget, which, in this instance, as the hon. Member for Lewes (Norman Baker) mentioned, is allocated within the overall budget for waste disposal. Of course, that is the same budget that funds revenue measures to divert waste from landfill. Therefore, the more that is charged, the less likely, in theory, that local authorities will be able to provide the revenue support to set up the mechanisms for waste diversion.

I was pleased that, in the pre-Budget statement, the Treasury announced a new method of dealing with the landfill tax. A large part of the tax forgone will be put into precisely those measures of diversionߞlarge waste management diversion, reuse and recycling projectsߞwhich partly overcome the perverse incentive. The mechanism does not, however, provide a clear way of dealing with market imbalance within local authorities.

In that situation, acting rationally, more local authorities are chasing permits than are supplying them. The assumed corrective is that the cost of doing that, or the penalties involved in non-compliance, will make local authorities act. That is by no means certain, however, because without the capital finance available to invest, a relatively long-term revenue hit may be an acceptable way of dealing with the situation.

There is another way of dealing with the situation, which is to secure capital means through diverting waste from landfill that does not cost capital to the local authority. The revenue hit can be taken and the waste diverted at the same time. That is the PFI route: entering into a deal with a private company to build the waste management plant. The problem, however, is that deals involving digestion, waste diversion through sorting or arrangements involving creating markets for recycled materials are complex, incremental and provide uncertain returns for the private companies involved. Acting as a rational authority, to tackle the problem with certainty and to know that a guaranteed impact will made over a periodߞfor example, to hit the targets set a number of years in advance by the Department under the Billߞsomething far more certain will be needed. That, of course, is incineration.

I do not decry incineration because it poisons the atmosphere. Modern incineration plants, by and large, do not do so. There is, of course, resistance to their siting by local residents, often understandably, but they are a relatively clean method of waste disposal, if we discount for a moment the increase in CO₂ emissions arising from widespread waste burning. Nor do I claim that incineration has no place in the waste hierarchy: it does, and there are items of waste for which the best outcome is incineration.

My concern is different, and it follows from the logic that I have just set out. Those who decide to go for incineration will want to get the most incineration for their money. They will therefore contract for the largest incineration plant that they can get. A 400,000 tonne plant, for example, is only three times as costly as a 100,000 tonne plant. We can see the effect of that on the development of incineration plants already commissioned or agreed. On 7 November, I asked the Department about incineration plants already under way. On the basis of the written replies to my questions, 11 of the 14 plants listed are over 100,000 tonnes and six are over 200,000 tonnes. It will be essential to attract the investment of a private company to build and run a larger incinerator, as that is the only way to make the impact required with the money available. The company will want to get a return on its investment.

For example, a company would not want to start running a large incinerator that was agreed with a local authority only to find eight years down the line that policy had changed and it was stuck with a huge redundant plant. It would want to strike a long-term deal over 25 or 30 years. Part of the deal would involve knowing that it would have feedstock for the incinerator because an incinerator without waste to incinerate is not much good. The company will, therefore, strike a deal for a guaranteed waste stream, which is the same waste stream that a local authority is supposed to be diverting to recycling.

The Department of Trade and Industry has made it easier to manage the waste stream into incinerators by exempting the putrescible element from the climate change levy, which means that energy produced from incinerated waste is more competitive. That means that incinerators become less viable generators of heat and power if they receive less recyclable and compostable waste. If local authorities are engaged in such a process, they will logically reach a point when their success at diverting waste and dealing with putrescibles starves large incinerators of their feedstock. They would then incur penalties as a result of their contracts which could be in excess of the penalties that they would have incurred by not meeting their landfill targets in the first place.

I imagine that the response to that line of logic is that it is precisely that: a line of logic with no salience in the real worldߞthe sort of stuff that a former academic might come out with. I decided to test the logic empirically. I asked two parliamentary questions in response to which the Department set out several developments that demonstrate the preference for large incinerators on long contracts. The answers also revealed explicitly that the Department does not know what local authorities are planning for the future. However, it is generally assumed that a relatively small percentage of domestic waste is disposed of using incineration and that that will continue in the future. I wondered how viable that assumption was so I wrote to all waste management authorities to ask their medium and long-term plans for waste management. The results were a little unsettling, to say the least. I have not entirely completed the work, and I am indebted to Hratche Koundarjian for his assistance in collating the results obtained from the 130 councils that provided substantive replies.

Of those councils, 45–35 per cent.—are contracted to private incinerator firms individually or as part of a consortium. Thirty-six councils, which is 28 per cent., could start using incinerators by 2018, while only 49 councils have no plans to use incineration. Nineteen of the 36 councils considering incineration have relatively short-term plans, 12 have medium-term plans and five have long-term plans. The overall cumulative trend shows that 45 out of 130 councils are involved in incineration, which will become 64 by 2008, 76 by 2013 and 81 by 2018. Incineration will play far from a small role because local authorities may well make rational choices to make a substantial amount of incineration a key element of their waste disposal policy.

Mr. Drew

My hon. Friend is making a compelling case and I have my own fears about any repercussions that may ensue. Does he agree that there are two further implications? First, owing to the capacity of incinerators that will be built, they will not be local solutions, but sub-regional and perhaps even regional solutions. Secondly, incineration is almost certainly predicated because of the centralisation of urban solutions. We could almost drive away small-scale rural responses because the easy solution to the problem will be to send waste to the next-door city or an alternative for incineration.

Dr. Whitehead

Yes, indeedߞmy hon. Friend makes an important point. In my work I tried to look at the trend in decision making on incineration, and did not take into account, for example, the way in which long-distance transport may be involved or the way in which the logic of large-scale incineration drives out what should be part of the hierarchyߞsmall-scale incineration in localities where appropriate.

Notwithstanding those effects, my figures suggest that the rational choice effect that I set out is in fact taking place. In the absence of other developments, a large number of large incinerators may well come on stream in the UK, in most instances providing heat and power, over the next 15 years unless measures over and above the very welcome and important mechanisms in the Bill are introduced. That will mean that the country may well jump out of the frying pan of landfill into the fire, literally, of incineration as the major method by which we dispose of our waste. What is more, in many instances we may be locked into that method of doing things for 25 years or more, most notably at the expense of the measures which really set us freeߞwaste minimisation, reuse, recycling and composting. I fully support the Bill, but I wonder whether the alternative to landfill of large incineration plants in use over a long period is a good idea.

5.16 pm

Mr. Peter Luff (Mid-Worcestershire)

This has been a thoughtful debate, with interesting speeches from Members on both sides of the House, including the hon. Member for Southampton, Test (Dr. Whitehead). Mid-Worcestershire wants to pay particular tribute to Mid-Bedfordshire, as the speech of my hon. Friend the Member for Mid-Bedfordshire (Mr. Sayeed) was an impressive performance. His resignation from the Front Bench is a loss not just for my party but, on this issue, to the whole House, as he has considerable expertise. We are grateful for his contribution to the debate, notwithstanding his resignation. I was particularly interested in what he said about foot and mouth disease, and hope that the Minister, in the short time he will probably have for his winding-up speech, will address that important point.

My interest in the issue derives largely from two constituency considerations. First, I have two landfill sites in my constituency. One is a conventional hole in the ground, as referred to by the hon. Member for Southampton, Test, at Hartlebury. The other is not a hole in the ground but a landrise site. A mountain of waste is being built between Wyre Piddle—one can see it clearly from the new bypassߞand Throckmorton, the site of a proposed asylum centre, which, I am glad to say, has now been dropped. A huge mountain of waste rises in a bizarre and eerie spectacle with seagulls wheeling overhead. An average of 200 lorry-loads of waste from large areas of Worcestershire and Herefordshire are taken there every day, and that is on top of the private cars that go there to use the private recycling and waste facilities.

The site still has 18 to 20 years of life, so it should see out my time as Member of Parliament. Sadly, our diversion targets in Worcestershire will probably not be met because we have lost the incinerator that we hoped to have in the north of the county. I do not want to get into arguments about whether it was right or wrong to put that incinerator in that particular location, but I would tell the hon. Member for Lewes (Norman Baker)ߞI hope that he will read the record when he returnsߞthat he need not be quite so pessimistic about the threat of incineration. In the public inquiry, the inspector gave as a reason for rejecting a planning application "perceptions of health risk". I find that an extraordinary and bizarre decision by a planning inspector. However, if an inspector can say that perceptions of health risk are a good enough reason to frustrate a development, many others can use that argument too. Personally, I find that regrettable because incineration is an important part of a comprehensive solution to waste management, as the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) said.

In common with virtually everyone who has spoken, certainly from the Opposition and, to an extent, from the Government too, I regret that the Bill does not take a more comprehensive approach to the problems of waste management. As my hon. Friend the Member for Aylesbury (Mr. Lidington) said, we are considering these issues in isolation. Departments do not get many opportunities to introduce legislationߞthere is always a fight for slots in the legislative timetableߞand it is a shame that this important Bill does not take a more comprehensive approach to the problems of waste management. The long title says that the Bill makes provision about waste and…the trading of emissions". It does not—it makes provision about biodegradable municipal waste, and only partly deals with that problem. It is therefore a shame that the Bill does not take a more comprehensive approach to waste management.

Targets are very easy to set, but more difficult to meet, as the Chancellor discovered in his public service agreements with various Departments. Those in the Bill are, by any standard, ambitious, so we will have to see whether its objectives can be achieved in the medium to long term.

In my constituency, we have recently made considerable progress, in general, in recycling, after what was, to be honest, a period of lethargy. We have been too slow to move, and I have always contrasted my household's enforced habits on recycling with the habits that we adopt when we go to the United States of America on a house swap. There, the biodegradable municipal waste goes down the sink disposal unit; however, there are separate bags for tins, plastics and papersߞit is a really comprehensive solution. It was interesting to note how a family that does not recycle everything at home—it is easy enough to recycle our papers and glass at homeߞeasily fitted into the model of full recycling, when presented with the easy opportunities provided by the local authority in Newburyport, Massachusetts.

However, progress is being made, and it needs to be made. Worcestershire county council's website says: Last year Worcestershire and Herefordshire threw away over 350,000 tonnes of rubbish. That's enough to fill 4,800 double decker buses every day. Most of this waste went to landfill. Another, more bizarre comparison is that that same waste would fill 42,000 refuse vehicles which would stretch from Worcester to Huddersfield. That shows the scale of the problem that the Bill seeks to address.

I am glad that the bids of all the local authorities in the county were successful under the waste minimisation and recycling fund, and I am grateful to the Minister and his Department for that. As a result, all the district councils are now rolling out their recycling targets. Wychavon district council and Worcester city council, both of which are Conservative controlled, are in the vanguard, I am glad to say. Wychavon's schemeߞa twin-bag approach, involving vans that can take the bags and the ordinary household waste—will be rolled out by the end of April to 94 per cent. of households. That will make a big difference in terms of recycling. All that waste will go to the landfill site at Hill and Moor, where there is a new recycling facility. That constitutes great progress, and all of this is very good news.

However, the issue on which I want to focusߞthere are many things that I wanted to say about this Bill, but time is pressing and other Members wish to speak—is a worrying aspect of the Government's approach to landfill issues, which has been discussed on several occasions by Members, including by the hon. Member for Lewes. He said something with which I both profoundly agree and profoundly disagree. He spoke eloquently, and rightly, about the impact of fly tipping on the British countryside, and the problems that it poses for the agricultural community in particular. He proceeded to argue for a sharp increase in landfill tax rates, but until we have thought of a way to deal with the fly tipping menace, it would be premature to increase landfill tax, even though there may well be a strong environmental case for doing so.

At the moment, the landfill tax rate is £14 per tonne. This year, it will rise to £15 per tonne, and a subsequent £3 per year escalator is envisaged, with an eventual target of £35 per tonne. This rapid rise in landfill tax will further increase the number of landfill tax criminals. They are creatures of the Governmentߞthey are the monsters of this tax, which the Government have createdߞand I have them in my constituency. [Interruption.] The Minister shakes his head, but I will tell him what is going on in my constituency, and then he will understand the problem. Ann Gartlan and John Bruce are the namesߞthey do have namesߞof the people concerned. She has been fined repeatedly in the courts, and he has just been released after completing half of a prison sentence for activities related to the illegal tipping of waste.

The enforcement effort required to control the company in questionߞit has adopted various guises, of which Ivory Plant Hire was the most notoriousߞhas been extraordinary. It has involved a huge amount of effort on the part of the Environment Agency, the Vehicle Inspectorate, the traffic commissioners, the local constabulary, the district council and the county council. We thought that we had won. Suddenly, the courts started to impose decent fines, and one of the people in question was sent to prison; but no, it has all begun again.

I shall read from a letter written to the county council by Adrian Hardman, a county councillor for Crabbe Yard, in Wadborough, which lies exactly on the boundary between my constituency and that of my hon. Friend the Member for West Worcestershire (Sir Michael Spicer). The letter states: As you know we have been fighting a war with various criminal organisations that are masquerading as legitimate firms, dealing in waste, which they either tip or crush illegally in my division with no care or concern for the community. Since the ringleader was sent to prison, the problem has not gone away but declined, but is now to quote her letter"ߞ a letter from a Wychavon district council officer who is dealing with this matterߞ 'as bad as it was in 2000'". He goes on: We must take a much more robust attitude to this problem, reminding ourselves that these people are not interested in the law, and adopting the position that it should be up to them to prove that they are within the law by contesting our enforcement notices. The county council does not view the problem as a waste matter. The council thinks that a building material is being recycled. It must be joking.

I have sympathy for the county council. So much effort has gone into controlling the firm in its various guises over so many years, but as Adrian Hardman writes: We must do everything to stop these people, whose sole aim is to profit from landfill tax. We will need a much firmer position for 2005/6 when the Government is aiming to raise it by £3 a ton, which will make the trade even more lucrative. The issue is exceptionally serious.

Sir Michael Spicer (West Worcestershire)

My hon. Friend is making a very strong case. I have known about the character he mentioned for many years at different sites. Such people are prepared to pop in and out of prison every year or so as the price that they are prepared to pay for the vast profits that they are making on the back of the tax. My hon. Friend is right. The legislation must be enforced.

Mr. Luff

I am grateful to my hon. Friend. It is a shared problem, but I do not believe that we are unique in the country in facing it. Such businesses exist entirely because of the landfill tax. That is what makes them viable. They can undercut legitimate operators and offer lower rates for the disposal of waste, which they then tip in the most irresponsible way.

About two years ago, there was an impressive police operation, together with the other agencies, about which I could bore the House at great length, but it did not have the required effect. John Bruce is out of prison. I quote from a letter from Wychavon district council's legal officer, Clare Flanagan, who states: Although I am aware that Ann Gartlan is on site"ߞ that is the one who gets the regular finesߞ on a daily basis and that John Bruce is still probably involved in the activities at the yard, neither of them has any connection with the owner Company, UK Plant & Haulage (Management) Limited. I cannot address them in this matter but must deal with the legal entity that is the owner, through its officers, Mr Wood Company Secretary and the Director. The failure of the Government to adopt a proper comprehensive approach to waste management has had many undesirable consequences, which other hon. Members have set out in their speeches. The consequence that I described is intolerable for my constituents, and the increase in landfill tax will make matters worse still. Will the Government please consider urgently a more comprehensive approach, at least to enforcement issues? A huge burden is being placed on local authorities and the constabulary in my constituency, and it is created by the landfill tax. They have to pay the price of cleaning up the mess.

I assure the Minister that this is not a cheap party point; it is a serious plea. There is a real problem. I wish the Bill would also deal with the enforcement of measures to tackle fly tipping and other such issues. Then we could give it an unreserved welcome, instead of merely a qualified welcome.

5.27 pm

Mr. David Drew (Stroud)

I am delighted to speak in the Second Reading debate, and I shall do so briefly, so that the hon. Member for Leominster (Mr. Wiggin) can also speak briefly. The problems described by the hon. Member for Mid-Worcestershire (Mr. Luff) are replicated in all our constituencies. There are people everywhere who abuse the system for disposing of their waste and misuse their land. However, I would add a rider to that. In a previous incarnation the hon. Gentleman chaired the Agriculture Committee, to which the Environment, Food and Rural Affairs Committee is the successor. We are taking evidence on waste. It was interesting that yesterday the Environmental Services Association emphasised how vital it was that the landfill tax was increased dramatically so that we become serious not just in our language, but in our intentions and actions with respect to waste. There is a debate to be had, although there are not necessarily easy answers.

I have just returned from Denmark. I shall not rehearse what I said on Friday in the Second Reading debate on the excellent Bill on municipal waste recycling, introduced by my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock). In Denmark we learned how people respond to both the carrot and the stick. The authorities there are not afraid to use fierce regulation, along with fiscal measures, to provide penalties as well as incentives. People there also respond very well to exhortation. It is a very different country, in terms of how people respond to what they see as their environmental responsibilities. So this can be done, and I hope that the Bill represents one small measure that will help to see it through.

I would like to make three quick points. The first is the one that concerns me most, although I am sure that it will become manifest in Committee where those concerns might be diluted, if not completely washed away. It relates to the transparency of what we are asking individual householders to do in relation to what the Bill offers. I shall make a point here that is probably a little more detailed than one might expect on Second Reading. I hope that when the Bill is in Committee—if I am on the Committeeߞwe can get someone to explain clause 3, which covers "Non-target years: default rules". I do not understand the formula that has been used. It looks as though the person who came up with the latest local government funding settlement formula has been on a day trip to my right hon. Friend's Department.

Such is the legacy of the way in which those formulae were derived that we are reminded of the old saying that there are only three people who can understand local government funding: one is mad, ole is bad, and the other is regularly on tap to the Minister, while the rest of us never get to see and talk to him. I just hope that we can get some clarification on this matter. The whole point of the Bill is that we have to change people's attitudes, and if it is seen to be too arcane or as something esoteric with which only parliamentarians will get involved, it will, unfortunately, be lost. It is an important Bill that could actually be seen to be moving things along.

My second point relates whether these measures are opening the door for incineration. I do not want to say much more than to congratulate my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on his particularly lucid explanation of the danger of giving a certain signal to people but ending up with them responding in the wrong way, out of sheer necessity, to deal with the target setting. We are all in favour of imposing better standards of behaviour, initially on local authorities but, through them, on the public. Unless we are clear, however, about how we are going to see that through, the danger is that people will look for the easy option. I am afraid that incineration is the easy option, as was landfill. For most people, if something is out of sight, it is not their problem. Unfortunately, it is a problem for those who have to live near the sites, and we all know that that is not a good way for the environment to operate.

My hon. Friend the Member for Southampton, Test also mentioned variable charging, and putting the responsibility on the householder to see the waste, weigh it and add up the cost. That would not be easy. I do not know whether other hon. Members have had the same responses as I have, following the council tax bills going out this week. This is not a party political point; in the main, council tax bills have gone up quite steeply this year, and there are all sorts of reasons for that. If we are going to tackle these problems seriously, I would argue that we need to disaggregate waste from these calculations. It is one of the most important functions carried out by local government, but often one of the most underrated, and we need to bring home its importance to people.

Norman Baker

I have heard the hon. Gentleman's point about the weighing of waste. That might encourage more glass recycling, but what would he do to encourage the recycling of plastic?

Mr. Drew

We have had this debate already, and I do not want to detain the House further. I want to give the hon. Member for Leominster a chance to speak. The hon. Member for Lewes (Norman Baker) can read what was said in last Friday's debate. It is important, however, that we look at recycling and at ways of putting it in place at convenient centres.

My last point relates to how we can ensure that the supply and demand for emissions trading operates at a level that will provide more than just a short-term solution. It really needs to be able to operate over the long term. I can imagine some authorities being keen to supply trading certificates while others will constantly demand them. That would not be good for the environment. I am a great believer in decentralized decision making and placing the responsibility on the people, because only when they see things happening at local level will they respond in the way that we want.

I hope that we shall be able to give the Bill detailed consideration later, but, notwithstanding my reservations, I think it is a good Bill. I will support it in the hope that it will set the standards that we should be observing.

5.35 pm

Mr. Bill Wiggin (Leominster)

I thank the hon. Member for Stroud (Mr. Drew) for speaking briefly. I shall try to do the same. I too spoke about this important subject on Friday, and I am one of those who signed early-day motion 333A.

In general I support the theme of the Bill, and welcome the progress towards greater environmental sustainability, a reduction in the amount of waste dumped in this country, and the promotion of better environmental management and practices. In its report of April 2002, the World Economic Forum branded the United Kingdom one of the dirtiest countries in the world. After six years of Labour government, the UK is ranked 98th in the list of 142 countries on the 2002 environmental sustainability index. The Secretary of State herself has admitted that each person in the UK produces about seven times his or her own weight in waste every year. We produce more waste per head than most other EU nations, and recycle less. Municipal waste is increasing at a rate of between 3 and 4 per cent. per annum, and the volume of waste could be double the 1995 level by 2020 if the trend continues.

I welcome moves to reduce the amount of municipal waste, and to help the UK clean up its act, but I feel that the Government have not addressed a number of issues adequately. I will be brief, so that the Minister will have a chance to comment on them.

The Local Government Association has explicitly stated that if local authorities fail to meet the new landfill waste targets in the Bill and are penalised financially as a consequence, that may only make the situation worse. It could result in a self-perpetuating vicious circle, whereby local authorities suffering the financial burden of fines and other penalties will find it even harder to meet their prescribed targets. Have the Government taken that into account? How do they intend to reconcile an apparent contradiction with the Bill's overall purpose? According to the DEFRA-commissioned review of the UK landfill tax, published last October, 25 per cent. of local authorities are likely to miss their statutory recycling targets in 2005–06.

The move away from a traditional reliance on landfill cannot be achieved overnight, and the introduction of a system of penalties will make it more difficult for waste disposal authorities to comply with landfill targets by diverting funds from the task of addressing the real challenges of providing alternatives to landfill. For the sake of local authorities, the Government must bear at least some responsibility for the Bill's implications. They must, for example, play their part in changing public attitudes to household waste in order to achieve significantly higher rates of recycling and composting, and encourage greater public understanding of the need to build new waste treatment plants.

There is also the possibility that, in trying to move away from landfill, and fearing a failure to meet targets and hence a penalty, local authorities will move to a greater use of incinerators. The amount of municipal waste incinerated without some form of energy recovery rose from 10,000 tonnes in 1999–2000 to 20,000 in 2000–01. We are all aware of the danger that, when local authorities introduce schemes for recycling and reuse of rubbish, they will be forced to use incineration exclusively. Friends of the Earth, for instance, fears that incineration rather than recycling or composting will become the norm. What do the Government plan to do to ensure that authorities do not move too far towards incineration? That is particularly important when they are not recovering energy.

There is also concern about the possibility that the UK and EU emissions trading schemes will not be compatible. Whereas the UK scheme concerns only industry, the EU approach specifically includes power generation.

The UK scheme is voluntary and awards allowances by auction, but the EU system is mandatory and issues allowances for free, according to past emissions.

The other great shame is that the Bill concentrates on target setting, one of the Government's peculiar propensities, instead of addressing the underlying problem, which is the amount of waste generated in the first place. The Minister will be aware of the waste hierarchy, but where are the measures to reduce waste production in the first place and then to encourage the reuse, recycling and composting of waste? Where is the pressure to recover energy from waste? Apart from the penalties related to emissions trading, the Bill is predominantly about landfill.

It is of concern that the Bill does not envisage a more comprehensive approach to the problem of waste, addressing merely the issue of biodegradable waste, but failing to focus on issues such as plastics, the ever-increasing fridge mountain—to which the Minister will be especially sensitive—or indeed of old and worn-out cars. As my hon. Friend the Member for Mid-Bedfordshire (Mr. Sayeed) pointed out, any green reward/penalty scheme should allow for the volume and not just the weight of waste, so that it targets lighter waste such as plastic bags, and should have waste minimisation as its ultimate objective.

Another issue that seems to have been largely overlooked is fly tipping. It was touched on by my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) whose constituency borders mine, and we share concerns about it. It is an evil and unsavoury practice that is likely to increase as the landfill tax rises. He expressed those concerns well.

My final concern is the potentially damaging effects that the increase in the landfill tax will have on the British manufacturing sector. The CBI, for example, has said: We are opposed to a substantial increase in the landfill tax on the grounds that it's imposing another substantial cost on businesses and as it currently stands, it doesn't appear to be achieving the desired objective. The landfill tax provides some incentive for waste and resource minimisation but will never on its own provide the appropriate signals for industrial and domestic users to change their behaviour. That was backed up by the Engineering Employers Federation, which has cautioned the Government about raising the landfill tax and suggested that if it doubled, small firms could face an increase of between £1,000 and £7,000 tax a year, while larger companies could pay up to £200,000 more a year.

Along with other trade bodies representing 10,000 employers, the EEF warned against adding to manufacturing costs at a time when profitability is already at its lowest level for nearly 20 years. The EEF has said: If we continue to make the UK a less welcoming environment for manufacturing companies, then business will simply vote with its feet and the movement abroad of our manufacturing base will accelerate. The bottom line is that, while it is undoubtedly imperative to consider ways to address the growing problem of waste, that must not mean that environmental issues should be used as an excuse for the Government simply to raise taxes. Although I broadly welcome the Bill, we must be careful in its implementation.

5.40 pm

Mr. Meacher

With the permission of the House, I wish to respond briefly to the points that have been raised. We have had a thoughtful debate from hon. Members on both sides of the Chamber, with the exception of the last contributorߞthe hon. Member for Leominster (Mr. Wiggin)ߞwho simply cannot resist making shallow political points, which is a pity. However, his contribution did not undermine the general tenor of the debate, which was of a high standard.

I am grateful to the hon. Member for Aylesbury (Mr. Lidington) for a thoughtful and fair speech. I heard what he said about agreeing with the general purpose and contents of the Bill and I look forward to working with him in Committee. Several hon. Members mentioned the possibility that the scheme in the Bill was too limited or isolated as a part of the general waste management strategy. However, the Government introduced the waste strategy in 2000, and the strategy unit report, "Waste Not, Want Not" has also been produced, to which we shall reply shortly. The scheme is not isolated. The Bill introduces some key legislative requirements necessary to fill out those parts of the waste strategy that do not have legislative cover.

The hon. Member for Aylesbury raised a number of points, and I shall try to deal with them. He asked about the quantity of emissions saved by the emissions trading scheme. The 34 direct participants in the UK emissions trading scheme have committed themselves to achieving reductions of 4.4 million tonnes of CO₂ equivalent. That is a significant total. It equates to approximately 5 per cent. of the UK's emission reductions up to 2010. The scheme is therefore significant and important.

The hon. Gentleman asked whether the baselines had been drawn correctly, so as not to allow some companies to take advantage through double counting. The hon. Member for Mid-Bedfordshire (Mr. Sayeed) was also interested in the matter. The emission reductions in the UK emissions trading scheme are not covered by any other regulations—that is, a company is not allowed to include emission reductions that result from meeting targets set in other regulations. In addition, giving the scheme's direct participants—of which British Airways is a good exampleߞabsolute targets means that their production could decrease. However, all businesses want growth: if their production increases, as is their aim, their absolute target becomes tougher. That is sufficient protection.

The hon. Member for Aylesbury asked about the lack of fit between the UK and EU schemes. That is a fair point, and the matter has caused the Government a lot of difficulty. Our scheme is voluntary: we thought it right to have flexibility in the early stages, to see how the scheme worked. In its wisdom, the EU has decided to have a mandatory scheme.

The current UK emissions trading scheme will finish at the end of 2006. The proposals in the Bill are designed to go beyond that date, but I am glad to say that we have managed to secure various provisions in the EU scheme. They include arrangements for opting out and opting in to the scheme, which will allow us to manage the transition in a way that we consider broadly acceptable.

The transition period is important to us. Our main aim is to ensure that the reductions of 4.4 million tonnes in carbon emissions under our UK scheme are achieved. We also want to minimise disruption to participants in our scheme.

The hon. Gentleman also asked about coal mine methane, a topic raised too by my hon. Friend the Member for Sherwood (Paddy Tipping). As I said, we of course recognise the benefits of capturing coal mine methane. We have secured climate change agreement for the industry, in terms of access to the emissions trading scheme, but I must make it clear that we are currently awaiting EU state aid approval.

With regard to entry to the emissions trading scheme, I repeat that there is uncertainty about what UK coal mine methane emissions actually are. That is the problem that the research that we have commissioned is designed to resolve. As a result, coal mine methane is not in the U K inventory.

The hon. Gentleman asked two other questions. The first had to do with passing penalties from the disposal authority to the collection authority. That is a fair point, and I can tell him that we are not attracted to legislating for that, although we could. We do not want to encourage the apportionment of blame, and we do not want that sort of culture to develop between authorities that must work together. We believe that the power of direction will encourage authorities to work together, and that it represents a better solution.

The hon. Gentleman also asked about penalties being passed between the four component parts of the UK. The UK as a whole is liable for the EU fine, but if that is due to a failure by a specific Administration, it will have to pay. That will be agreed through concordats between the UK Government and the devolved Administrations.

My hon. Friend the Member for Stafford (Mr. Kidney) asked whether county councils were correct in their approach to incineration and recycling targets. They are, in the sense that incineration is not recycling and does not count towards the recycling targets. That is obvious. But incineration is a form of recovery and would be part of their non-statutory recovery targets. He also asked about the compatibility of the UK and EU emissions trading schemes. I tried to answer that. We believe that the opt-out and the opt-in system means that, on both sides of the transition date of 2008, we can get compatibility with the mandatory EU scheme that is satisfactory to us.

The hon. Member for Lewes (Norman. Baker) raised a number of points, as is his wont. He and others referred to fly tipping, which the Government recognise is a serious problem. However, the idea that the landfill tax automatically makes that worse is wrong. There is nothing to stop anyone taking waste to a civil amenity site free of charge. One does not have to dump it in the countryside to escape paying the landfill tax.

We have done some more positive thingsߞ

Mr. Luff

roseߞ

Mr. Meacher

I will come back to the hon. Gentleman, who raised a different point. The strategy unit has recommended more rigorous prosecution of fly tipping and we are considering that seriously. I attended a meeting of the fly tipping forum, which is chaired by a senior official of the Environment Agency, and I looked at a series of ideas, many of which I am keen to pursue, including a big increase in penalties, which I think is critical.

Norman Baker

Will the Minister give way?

Mr. Meacher

I am unwilling to. The hon. Gentleman had a lot of time and I am trying to answer several of his points, but I must try to cover everyone else.

The Government White Paper on antisocial behaviour, issued on 11 March, included proposals to give local authorities a strategic role for dealing with fly tipping and ensuring that they have sufficient powers to do so. One objection has been that it is all left to the Environment Agency, which does not have the resources and manpower to do it. Local authorities will now have equivalent powers.

The hon. Gentleman asked about the derogation. We have a derogation at each of the trip points: 2006 to 2010, 2009 to 2013 and 2016 to 2020. My view is that we should try to meet the first of those dates and not use the derogation unless we have to. It is not infra dig to have to use the derogation, although there is no question but that, for 2006, we will have to use it. It is too early to say about 2016. I would hope that we will make sufficient progress and that we will not need to use it.

The hon. Gentleman referred to allowances for sale, and thought that so many local authorities would be off-track that the cost of licences would be high, and that, therefore, local authorities would prefer not to comply because it would be less expensive. First, I am chasing local authorities to make jolly sure that the number who do not comply is as small as conceivably possible. I wrote to 142 authorities last August and I am now pursuing those that we believe are not on-track. The real answer to his point is that the penalties will be set at a level that makes non-compliance the least attractive option.

The hon. Gentleman asked about the export of waste to the Republic of Ireland, but it is allowances that are traded, not the waste itself. Under the Basle convention, waste cannot be exported except for recovery, but it will be for the Northern Ireland Administration to decide the details of their scheme.

The hon. Gentleman also asked about the waste hierarchy and he referred to clause 17(3). All the options that he quoted are, indeed, options, but they are not stated in terms of the hierarchy. I assure him that the waste hierarchy prevails. He asked whether incineration would have preference over recycling, and my hon. Friend the Member for Southampton, Test (Dr. Whitehead) also drew a great deal of attention to that issue. We believe that we have given sufficient incentivisation to recycling to make the scenario that was outlined unlikely. I do not now have the time to argue the point, but I am sure that we will return to it in Committee.

My hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) asked what would happen if a disposal authority received a penalty as a result of a fault committed by the collection authority. The point behind the power of direction is that a waste collection authority cannot prevent the targets from being met. As I have said, passing down penalties simply creates a blame culture and removes money from the system.

My hon. Friend also asked about penalties for authorities that have to continue to send material to landfill under a 25-year contract. He said that such penalties were unfair. The landfill directive was put in place in 1999, and it was the subject of negotiation for many years before that. The need to reduce the landfill of biodegradable municipal waste has been known for a long time, so that casts doubt on the point about there being a need to guarantee a particular quantity of waste for landfill.

My hon. Friend also asked about incentives. No one has drawn attention in the debate to the fact that the Government have increased the rate support grant in regard to waste management by £1.1 billion in the current spending review period and by a further £670 million in the next. We have provided a local authority waste minimisation and recycling fund of £140 million and increased by 60 per cent. the private finance initiative to £355 million. I do not think that local authorities can say that they are not adequately funded.

I am sorry that the hon. Member for Mid-Bedfordshire is no longer on the Opposition Front Bench, but he has not lost his critical edge. Among other things, he raised the issue of recycling and the landfill tax. The Government have certainly already agreed that any increase in landfill tax will be revenue-neutral and that it will be used to fund sustainable waste management programmes. We are currently discussing in government how that is best done, but we accept the principle.

The hon. Gentleman asked about composting and animal diseases. There is no such thing as zero risk, but independent risk assessment shows that catering waste can safely be composted. The place for controls is in the animal by-products regulations and not in this Bill. We take his point that this is not the appropriate place to deal with the issue. Composting at 98° Cߞthe provision is the result of an amendment made in the other placeߞdoes not simply produce compost, because everything is killed and not just the harmful pathogens. That is why we object to the provision.

I have not had a chance to respond to all the points raised, but I will be glad to do so in correspondence. I look forward to working in Committee with those who have spoken in the debate. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.