§ [Relevant documents: First Report from the Trade and Industry Committee Session 2001-02 HC 299 and Second Special Report (Government Reply).]
§ Motion made, and Question proposed, That the sitting be now adjourned.—[ Mr.Heppe11.]2.30 pm
§ Mr. Martin O'Neill (Ochil)
I am pleased to obtain this debate because the end of life vehicles directive is important. It was the subject of the first inquiry on which the Select Committee on Trade and Industry embarked after the general election. That inquiry resulted in a report that was published at the end of November last year. The Government responded towards the end of February. Their response was in the public domain in March. The directive took effect on 21 April 2002.
The purpose of the directive is to ensure harmonisation of the different schemes for dealing with cars that have reached the end of their useful lives. On average, that occurs after 16.3 years. However, as with all averages, it is probably misleading because some cars have engines that continue to operate much longer and some have bodywork that will not stand up to the engine—rather like human beings.
The intention of the directive is to provide a Community-wide framework to deal with 8 million to 9 million tonnes of waste throughout the European Union. Its aim is to reduce that amount of waste by encouraging and facilitating the recycling of some of the materials used in the assembly of motor cars. The directive has a preference for reuse and recycling.
The directive requires member states to ensure that systems are in place for the collection, treatment and recovery of end of life vehicles. The last holder or owner of a car is required to deliver it to an authorised treatment facility without cost, even when the vehicle has no value or even negative value. Member states are required to ensure that producers meet all, or a significant part, of the costs. The directive covers end of life vehicles, components and materials, as well as spares and replacements, without prejudice to safety standards, air emissions and noise controls. There is an exemption for vintage vehicles.
It must be emphasised that, from conception of a vehicle, preventive measures should be implemented to avoid waste and heavy metals being integrated into design and production, with quantified targets for those objectives. The directive is both retrospective and prospective: it covers cars that have already been produced and that, after 2007 vehicles, will be constructed in a way that allows recycling and a reduction in heavy metals. Obviously, it is desirable to have a smaller amount of unacceptable materials included in the construction of cars. Their construction 138WH and design, and the components from which they are assembled, should effectively and economically facilitate recycling.
The directive is nothing if not prescriptive, and the areas to be covered are clear. The motivation behind it is to protect the environment, end the abandonment of ELVs and recycle dismantled parts, but the Select Committee's main concern was its impact on the car industry and on the infrastructure for dismantling and treating the materials that remain. Ensuring that due attention is paid to the environment is not the direct remit of the Department of Trade and Industry, although it is part of it. The Committee was, therefore, preoccupied with the protection of the British manufacturing base, particularly the car industry.
There are different areas of concern within the car industry's manufacturing and assembly base. Of the old, established firms, which are responsible for a substantial part of car production, Rover, General Motors and Ford have the biggest car part—they are responsible for the largest number of cars in production—in the earliest period considered in the directive. New entrants such as Toyota, Peugeot, Honda and Nissan have different difficulties, which I shall consider in a moment.
Rover, GM and Ford have, however, all seen their market share diminish, which has left them with a smaller resource base to fund their obligations under the directive. It could be argued that multinationals such as Ford and GM are major international players, which could be expected to shoulder their burden and to spread it over a broader cost base. They are, however, still vulnerable to the cut-throat competition on the world market. If the Department of Trade and Industry and the other ministries responsible for this issue make the wrong decision, it could have implications for investment into Britain. Areas such as new plant and new models could be subjected to a shift of priority from one country to another, which would have consequences for British manufacturing.
MG Rover is not a multinational, but a British company. It is emerging with some success from a difficult period, but will face the consequences of a marked decline in market share. As a result, its existing base will be extremely limited and vulnerable. Proper consideration must be given to its problems with meeting its responsibilities under the directive. Although it is making a good fist of the targets that it has set itself, it has yet to reach even medium-term self-sustaining growth. It has done well in the short term, but there is a long way to go. It would be tragic if this British manufacturer, which could be great again, was encumbered with responsibilities that it could not reasonably be expected to meet.
The plight of the newer players is different, but none the less parlous. Companies based in the UK are already wrestling with the eurozone and the prospect of further price cuts in the UK following the, I hope, dramatic changes in the block exemption, which we hope will come before too long. The financial position of those firms is not too robust. Were a company to introduce a model in 2003 with a lifespan of four or five years at most, by 2007, there would be a requirement for production by that manufacturer, whether of the old or new generation, to comply with the directive and to be recycle-friendly. Unless proper guidance is given very quickly, lines that are being designed and built might 139WH have to change in the middle of the production cycle, resulting in considerable cost to the company. Companies should know from the outset what the requirements will be and how they will be incorporated in production runs, if there is a case for the production line to be changed in mid-life.
Both the old hands and the new players fear that the cost apportionment of current versus historic market share could result in some companies paying considerably more than they should. Companies with ambitions to increase their share—some new players have recently experienced a dramatic increase in their share of the market—may become responsible for a contribution based on market share at a time that does not relate to the number of motor cars that fall into the ELV category. Therefore, they would pay more of their share than companies such as Ford and GM, which can better shoulder the burden, even if they experience a decline in market share.
No part of the car assembly manufacturing industry would remain unaffected by a clumsy and maladroit application of the directive by the DTI. I am not saying that such a clumsy application will necessarily happen, but flagging up a concern. There is a great responsibility on the Government and officials to take proper account of important concerns such as the impact of declining market share and how to evaluate the size of responsibility, based on an arbitrary application of market share rules.
§ Mr. John Taylor (Solihull)
The hon. Gentleman referred to the big players among motor manufacturers. Will he concede, for the sake of the record, that Ford in United Kingdom terms means not only Ford but Jaguar and Land Rover?
§ Mr. O'Neill
I take the hon. Gentleman's point and do not want to dispute with him, but my main interest is in volume production cars. That is the area of greatest concern to me. A German Member of the Bundestag might ask about Mercedes, but Jaguars, Land Rovers and Mercedes fall into a different category from volume production cars. Cars such as Mercedes and Jaguars are made to a higher specification and have a longer potential life, so the ELV question is not quite of the same order.
Also, when luxury cars reach the end of their life in the United Kingdom, they can become attractive elsewhere in the world, in places where such marques are too expensive earlier in their life. The second-hand market is of a different order. I take the point made by the hon. Gentleman but it is not so important compared with the worries of the volume car producers—new entrants to the UK market—which see themselves producing even greater volumes in the not too distant future.
One theme that was raised several times in our report—it will probably be repeated today—is that the Government must make up their mind early in the day, in order to give companies the opportunity to plan and to make proper provision.
§ Mr. Philip Hammond (Runnymede and Weybridge)
I tend to agree with the hon. Gentleman, but does he 140WH concede that one month after the directive was supposed to be transposed into international law could scarcely be described as early in the day?
§ Mr. O'Neill
The hon. Gentleman confuses the requirement to transpose the directive into international law and the requirement to put it into effect. There is a time delay, and the clock is running perhaps more quickly than the Government would like. He used a cheap debating shot in asking that question. He would have done better to save it for his summing up. He may yet choose to do so, but it is not a good shot. There are good ones, but that is not one of them.
It can be explained simply. There are about 12 months between the directive entering the corpus of legislation and its beginning to bite. We have to take decisions by 2007, but we must remember that those who design and assemble new cars in the UK will want their production runs to be on all fours with the objectives of the directive, and they need an indication of the decision as soon as possible. Before we get to that stage, however, we must take account of the concerns of those responsible for dismantling, recycling and shredding vehicles. They will need to know what will be required of them and how it is to be funded. As important, of course, motorists will want to know how much they will be expected to contribute.
Underlying it all, the system for ELVs needs to be effective and enforceable, not only to ensure the collection and dismantling of vehicles, but to resolve disputes. The matter of dispute resolution is central when it comes to the apportionment of cost. How valuable is a car? Has it a negative value, or is it worthless? As a consequence of the Finance Bill, changes will be made in the requirement to inform the authorities, so the abandonment issue is beginning to be addressed, but at somewhat glacial speed. The press notice from the Departments for Environment, Food and Rural Affairs and for Transport, Local Government and the Regions of 10 April goes some way to meeting concerns about abandonment, but apart from issuing platitudes about the Enterprise Bill, the Minister will need to tell us what is being done about the processing of ELVs, and particularly what will happen to cowboy shredders.
Will the Environment Agency have the necessary resources to play its part? Will it have the finance and the people to police things? We are talking about a sizeable number of small enterprises, which will come and go and which will probably be barely registered for value added tax and the like. The other irony is that if the Environment Agency gets the resources, has the people and is able to police the measures, and there is a consequent diminution in the significance of the cowboy, a greater burden will be placed on legitimate operators in this area. They will have to carry out far more work, probably to more environmentally demanding standards than ever before.
Those operators will have to be carried along, and their trade association is correct to express anxieties about the issue. It does not know how much will be demanded of them. It is not necessarily confident that those who are interested in participating in this activity will be in a position to do so if they are not sure how profitable it will be in future. It is all very well hiding 141WH behind the froth of the Enterprise Bill, but we need rather more than that, and I hope that the Minister will address the matter this afternoon.
The question of the permitting of authorised treatment facilities is simple. As I understand it, no proper assessment has yet been made of the costs of getting such facilities. People will want to work out what their investment responsibilities will be if they continue in that area. That is dealt with in a rather intriguing part of our report. Anyone coming to it without having read the rest of the report—I know that the Minister will have read all of it very assiduously—might think that the term "certificates of destruction" suggests more a heavy metal band than a certificate that shows that vehicles should have been destroyed.
My only worry about that is that the Driver and Vehicle Licensing Agency will have a central role in the certificate of destruction process. It would stretch the truth to say that, in the world of public administration, the DVLA is among the sharpest tools in the box. Many of us, when dealing with the agency on behalf of constituents, have found that it is one of those arm's-length Executive agencies with which one must, to say the least, be patient and tolerant. Its flexibility on occasions has not been as evident as one would like. We hope that it will be able to raise its game sufficiently to meet the challenge. The Minister is doubtless giving a sigh of relief that the DVLA is not the responsibility of his Department. However, he might nod in its direction and give us some reassurance. I would like to think that he could consider that area.
There is still a yawning gap as regards finance. We have considered various options, but the question of the trade-sponsored option 4 still has to be dealt with. We would like to know how the dialogue is progressing between vehicle manufacturers and shredders and the Government on that option. When can we expect a Government response? The reply that we received is peppered with phrases such as, "You can expect a response before too long." If the Government do not have a clue, they do not even put a time qualification on it. However, option 4 is of such significance that I would like to be given some guidance today on what is happening. The issue is not of earth-shattering significance, but many businesses, involving many jobs, are looking to this debate for some indication of progress and development in Government thinking.
§ Chris Grayling (Epsom and Ewell)
I refer hon. Members to my entry in the Register of Members' Interests. I am not sure that I agree that the issue is not one of earth-shattering importance. The industry has changed dramatically during a 20 or 30-year period. There are different manufacturers in the marketplace. If the Government get the decision wrong, the impact on the industry—old or new—could be severe. Therefore, it is important that when the Government take a decision, which I hope they will do sooner rather than later, they recognise the realities of the motor industry and do not damage employment in the industry.
§ Mr. O'Neill
Had the hon. Member been present for the opening part of my speech, he would have heard me say that. In the great scheme of things, it is not the biggest issue, but it is important to many who want to make important management decisions that require 142WH some indication of what the financial basis for their future actions is to be. It might be the man in the yard who realises that he must get his act together in order to keep dismantling, shredding and doing that kind of work, or the company that wants to know whether it should have another model in the UK, or whether the uncertainty will make it prohibitively expensive to get a line here. The issue affects a broad range of people, and will become important only if things that should happen do not—then it will be too late. That is the point that we are probably both groping towards.
I should like to think that we could get some guidance today on the matter of funding. Where will it come from, to whom will it go and in what order will it go? In such areas of dispute, what kind of arbitration procedure is likely to emerge with the negative value adjudication scheme?
I have barely mentioned the car owners. I was going to say "poor car owners", and could do so in the sense that I am sorry for them. Many of the people we are considering have bought cars towards the ends of their lives. They are among the poorest drivers in the country and have the lowest incomes. They have cars not for joy riding but because they need them for their employment. They can buy only the cheapest cars available. The responsibilities of such individuals must be made clear to the rest of the motoring public. We need an indication of the Government's thinking about whether there should be a levy on car insurance, an increase in vehicle excise duty or some formal contribution. If sizeable sums are to be spent in the short term, one would imagine that the funds raised in any year would be insufficient to meet the challenges. It could be the subject of a medium to longer-term taper.
We are conscious that this measure is necessary. It is, in some respects, desirable. It would be helpful if our motor cars were easy to dismantle and assembled from environmentally friendly components, and if we could avoid the disfigurement of our towns and villages by abandoned cars. It is little consolation, when one drives past an abandoned car, that after the third day there is a sticker on it from the police saying, basically, "We know that the car has been abandoned, we do not think that it is criminal, but we do not think that it is very important either; we have far more important things to do." Before long, kids start taking the wheels off, somebody sets fire to it and it becomes a hazard. We can do without that. That is one of the elements that is most evident to the public. We need clear guidance.
I recognise that my hon. Friend the Minister is not responsible for those matters, but we are talking not just to the DTI; we are talking to Government. The message will, perhaps, trickle down to other parts of the broader Government machine, which we would like to think could handle these matters. However, I am sure that my colleagues on the Select Committee, as well as other hon. Members who are assembled here today, would like an assurance that the DTI will not only continue to promote the measures that are required by the directive, but monitor their implementation to minimise the dangers of confusion and disruption, and that the Government will make the appropriate information available to the players as early as possible.
In the report that we produced at the end of November, which was published at the end of December, we requested that there should be some form 143WH of information programme early in the new year. When I looked at the DTI website today, I did not see much evidence of proaction. Apart from the froth relating to the Enterprise Bill, it included little from the DTLR or other Departments responsible. Having said that, I do not wish to suggest that we are running out of time yet—we are not. We still have some months in one or two areas and a little longer in others, but that is no grounds for complacency or for hand-wringing and saying, "It may be difficult, but we will get round to it eventually." Many clever people are employed at considerable expense to take on responsibility for solving such problems.
§ Mr. O'Neill
I am just about to finish.
There are many people who, when presented with a European directive, are energised into providing a form of words that is so all-encompassing and watertight that no one can ever get around it, but there is a more pragmatic, flexible approach abroad. When one asks British civil servants why they took a certain line, they say, "Because we do not want to be challenged in the courts." There is paranoia, especially manifest in the DTI headquarters at Victoria street, that European directives must be perfect, and that nothing can be done unless that perfection is matched in their implementation, and then we find that there are contradictions, problems and difficulties.
I would like to think that, in this instance, we could show some pragmatism and realism. The best need not necessarily be the enemy of the good. Many jobs and important work in this country depend on the successful and appropriate implementation of the directive. I would like to think that this debate could reassure those outside, who will be looking to the Minister for guidance and leadership, that the directive can be successfully implemented, and not at the expense of British manufacturing, jobs or motorists.
§ 3.3 pm
§ Mr. John Taylor (Solihull)
I wish to make a brief contribution to the debate. I have a west midlands motor-manufacturing constituency, although I carry no one's brief into the discussion. I have other duties elsewhere in the Palace of Westminster later this afternoon, so if I do not stay to the end of the debate, no discourtesy is intended to you, Mr. Deputy Speaker, to the Minister or to the Chairman of the Select Committee.
The Select Committee has done a good job in providing a report on a subject that is probably far more urgent and important than has so far been suggested. That is not a criticism. I am anxious, because the largest component of the economy in my constituency is an organisation that everyone will have heard of, Land Rover. The company employs 9,000 people in my constituency, and it is said that for every job on the plant, there are eight or nine off it. Land Rover is a serious employer in the midlands, although the hon. Member for Ochil (Mr. O'Neill) and I have already 144WH realised that Land Rover is not central to the focus of the directive. In every general election, I have a Land Rover for a campaign vehicle. On one occasion I said the Land Rover that I was driving was 17 years old. I then received a furious telephone call from its owner, who had lent it to me, telling me that I had no business saying that as it was 27 years old. Land Rovers that were made immediately after world war 2 are still operating.
My constituency is not in the eye of the storm or likely to be heavily affected. The hon. Member for Birmingham, Northfield (Richard Burden) might feel that the storm is closer to him, likewise my hon. Friend the Member for Bromsgrove (Miss Kirkbride). I come to the issue from a rather unusual angle, which might be seen as uncomfortable or unexpected. However, hon. Members will be relieved to hear that my speech will be brief as it will not take me long to deliver my message.
In the normal course of commerce, someone manufactures a commodity and sells it either directly or through an agent or distributor, as is common in the motor industry. The moment of sale—the point at which money and goods are handed over—is sometimes the end of the matter, but not always. There are continuing rights and obligations after sale: for example, if goods are dangerous, criminal law may have something to say about their sale; the law of tort will have something to say about goods being fit for purpose and of merchantable quality; the law of contract may partially override those common-law concepts in the form of warranties and guarantees. When I was a practising lawyer, I used to advise my clients to be wary of signing warranties and guarantees, because they generally take away more rights than they give. The common law is a good protector of the buyer, and it is usually superior to the warranty.
Part of the story of the 20th century is concerned with hire purchase, finance agreements, credit sale and the like—arrangements in which the buyer might complete paying the price over a period of time. For various reasons, business between the seller and buyer may not be concluded at the moment of sale. We are used to the fact that the sale of merchandise is not a cut-off point. In this debate, however, we are dealing with something new: we are imposing on the manufacturer an obligation that lives long after the sale, possibly onward to the sixth or seventh owner of the motor vehicle, who is unknown to the manufacturer at the time of manufacture. I am concerned about creating that new obligation on manufacturers.
I unashamedly come to the matter from the position of the manufacturer. We all know that the motor industry is extremely competitive, and that there is huge overcapacity in the world. That is why the Ford Motor Company has changed its original philosophy from one of great quantity and small margin to one of small quantity and high margin. Range Rovers—vehicles of which everybody will have heard—are made in my constituency under the ultimate patronage of the Ford Motor Company. One can pay £65,000 for one of them, and the profit margin will be far greater than on the humble Escort. I am not demeaning the Escort, which is a fine piece of engineering. Like most Ford products, it is subject to the highest degree of research and development and it is a fine car, but nobody should imagine that the profit margin for those involved in its 145WH manufacture and sale is the same as that derived from a Range Rover, which is why Ford is moving to a different part of the market.
Given the overcapacity in the world automobile industry, we must try to minimise the disadvantage to manufacturers in the United Kingdom. That is not protectionism; it is common sense. The directive is a new obligation that will ultimately fall on the manufacturer, and I am concerned about it. Why are we doing that to motor cars and not to anything else? As the old Greek geometers used to do, let me reduce the matter to absurdity by asking why do we not apply the directive to pairs of shoes, or even newspapers? The pragmatic answer is that it is easy to throw a newspaper in a wastepaper bin or to throw a pair of spent shoes into a dustbin.
Perhaps the key to the matter is size or chemical content. It is true that motor cars contain metal chemistry that could be dangerous. I shall not pursue that line of argument unduly, save to say that the directive is unusual, special and targeted, and it must carry a cost.
§ Dr. Vincent Cable (Twickenham)
Does the hon. Gentleman not recognise that precisely the same logic has been applied—with disastrous consequences—to refrigerators and will be applied in due course to televisions? The directive is far from unique and there are lessons to be learned.
§ Mr. Taylor
I am extremely grateful to the hon. Gentleman for his intervention, which has widened the horizon. I am glad that he spoke along those lines. If we want to live in a free society we have to live in a responsible society. That means that responsibility rests above all with the owner of a product that is coming to the end of its life. We cannot live in a nanny state in which a European directive will magically come along and save us. To borrow the hon. Gentleman's example, if a television set or refrigerator has come to the end of its life, my proposition, which is at least worth examining, is that the person responsible for its disposal is its owner. The owner should make proper inquiries with whatever disposal agencies there are in the area to discover how to get rid of that television set. In my borough of Solihull in the west midlands, the waste disposal authority will answer that question and will often provide assistance.
The hon. Gentleman might have persuaded me that the directive is not unique; however, it is relatively narrow. My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) will say in due course that there will be no end to it because it will expand and extend. The old adage used to be caveat emptor—let the buyer beware. Adages that should not be lost in this debate are let the owner take care, let the owner make inquiries and let the owner dispose. Please do not add a further burden to our industries in a very competitive area of overcapacity.
§ Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East)
The hon. Gentleman mentioned constituents who ask how to dispose of certain 146WH products. Surely something needs to be done about individuals who do not ask that question. That is why the directive is necessary.
§ Mr. Taylor
I am grateful to the hon. Gentleman. I am talking about a responsible society, and I am not sure that the directive moves us further in the direction of a responsible society; if anything, it moves us further away from one. The person who wants to dispose of an item should make such an inquiry. Later in the debate, the hon. Gentleman might suggest what sanction he has in mind for the person who is relatively reckless, but I do not design my society around reckless people. I conceive my society around responsible people. [Interruption.] The hon. Member for Ochil makes a comment to which I would be happy to respond, but I did not hear it.
§ Mr. O'Neill
I was being facetious, but I thought that in his previous incarnation the hon. Gentleman was a criminal lawyer.
§ Mr. Taylor
I accept that point, but I have to say that I am still in the same incarnation as I was then. If I do come back, it will certainly be to this place, if that is possible, and as a Conservative. My useful remarks have reached their conclusion. I thank hon. Members for their courtesy in listening to me.
§ Richard Burden (Birmingham, Northfield)
I must try to work out how to follow that last comment—something about there being life after death in the Conservative party springs to mind.
I am pleased to follow the hon. Member for Solihull (Mr. Taylor), whom I know well. I am speculating on the concept of a Land Rover ever reaching the end of its life. That is a condition not often applied to Land Rovers; they tend not to do that. I welcome the debate, and compliment my hon. Friend the Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee, on the comprehensive way in which he has introduced it.
In this place, we have quick Corridor discussions in which as well as saying, "Hello, how are you doing?" people ask, "What are you up to at the moment?" or "What are you working on?" There was a period during the Select Committee's inquiry when I was getting approaches from the motor industry, dismantlers and others, and the end of life vehicles directive was occupying a great deal of my time. At that time, when asked those questions, I would turn and answer, "Well, actually, I'm doing quite a lot on the end of life vehicles directive," which would prompt a rather pitying look in people's eyes. That look became even more pitying when I shook them and said, "I know it sounds boring and tedious, but it really is very important." I almost got the impression that while trainspotters have a—perhaps unwarranted—bad name, end of life vehicle spotters have an even worse one.
However, we have to deal with this important matter. The hon. Member for Solihull took a philosophical view of whether such a directive should exist. I might take issue with some of his arguments, but his view does not acknowledge the position that we are in. The directive does exist, and we must deal with it and work out the best way to apply it. That presents us with various 147WH problems in different areas. We must apply it in such a way that, so far as possible, the directive helps to address the real problem of abandoned vehicles and does not exacerbate it.
Competitiveness, including the competitiveness of the manufacturing industry, is important. The hon. Gentleman and my hon. Friend the Member for Ochil rightly stressed the fact that vehicle manufacturing is a highly competitive and ruthless industry in which price means a great deal and the margins for particular manufacturers can be very slim. We are also dealing with issues of competitiveness in another industry—the disposal, shredding and dismantling industry, which can also accurately describe itself as a cut-throat industry where competition causes real problems.
We need to get our policy right and do so in a way that takes account of not only those two legitimate interests, but the interests of those whom my hon. Friend the Member for Ochil referred to as the "poor car owners", who must not be forgotten. He is absolutely right to point out that the car owners most affected in practice by the directive will often be those who are least able to pay. It is a difficult problem, and one on which the clock is ticking. We must get it sorted out, but we also have to get it right.
I will concentrate on three issues, although the directive covers many different ones. First, there is the question of accrual to which my hon. Friend referred. How should producer responsibility be calculated within the vehicle manufacturing industry? Accrual involves the question of historic car parc versus current market share. Secondly, we should explore the relationship between what we do in the United Kingdom and the way in which the directive may be applied in other parts of the European Union. Thirdly, what is the fairest way of implementing the directive, which states that from 2007 producers have to meet all or a significant part of the cost of take-back and treatment? I would like to explore the relationship between the directive and questions of fairness, efficiency and competitiveness in the vehicle manufacturing sector and the dismantling and disposal sector.
If there is to be a liability in the vehicle manufacturing industry, how is that to be spread? How can the problem of historic car parc and accrual be taken into account? Even though Ford Escorts are no longer manufactured, it is clear which company manufactured them: the company was and still is called the Ford Motor Company. Even if we went back further and considered a much older model, the Ford Popular, it is pretty clear which company manufactured it. It is still Ford.
§ Mr. John Taylor
What would be the position regarding an end of life car that was originally made in Japan?
§ Richard Burden
If the hon. Gentleman can contain himself, I am coming to precisely that point, but before we consider cars that are made in Japan, I would like to mention other historic names that are not around any more. What if one owns a Standard Vanguard, a Triumph Toledo or a Wolsley Hornet? Which 148WH companies produced those cars, and who has responsibility for them now? The names are quite well known in the industry.
§ Miss Kirkbride
The hon. Gentleman raises an important and interesting question. My fear is that our joint car company actually owns those makes now, even though they are not being made. Will he clarify whether the responsibility, under what he thinks that the law might be, would rest with Rover?
§ Richard Burden
The hon. Lady has got two out of three. I mentioned the Standard Vanguard, Triumph Toledo and Wolsley Hornet. In fact, they all transmogrified into the British Motor Corporation, then British Leyland, which was taken over by BMW, and two are now owned by a company called MG Rover. However, Triumph is still part of BMW. That was an issue in 2000, but I will not go down that road.
The assumption behind the directive, and an assumption often made about the motor industry generally, is that smaller players are gobbled up over time by bigger and bigger corporations. That is what happens in most cases, most of the time, but it does not happen in all cases, and that is why the hon. Lady is right. She is particularly right about MG Rover. Those little companies did go into the British Motor Corporation, then British Leyland, and eventually they became part of BMW. When BMW pulled out in 2000, MG Rover was created, which is clearly a small to medium-sized car producer.
I have to declare a constituency interest. MG Rover's manufacturing plant is in Longbridge in my constituency. The engine plant is in the hon. Lady's constituency across the road. The company has achieved great things since it became MG Rover in 2000—in fact, it has achieved things that at the time most of the industry analysts said were impossible. However, it is still a small company operating in a very competitive market. If the directive is implemented in the wrong way, the consequences for the company could be severe.
As my hon. Friend the Member for Ochil said, there is no easy answer to how to spread the cost within the industry. MG Rover has about 4 per cent. market share. It is struggling, but it is doing very well and shows every likelihood of making it. If one hits such a company with a liability to pick up the tab for about 10 per cent. of the historic car pare, which is the proportion accounted for by the historic names, one places on it a potential burden—I always find it difficult to use that word—that could have serious consequences for its future. We need to work that through.
If we say that that is not a fair way to do it, what is the alternative? A suggestion often made is to base liability on market share. The hon. Member for Solihull mentioned the number of companies that are in Japanese ownership. They now have a substantial market share—rightly so, because they make quality cars—but they arrived relatively recently in the British vehicle market. Is it fair that they should pick up the tab for vehicles for which they have no responsibility? It is not an easy question. It is a question of balance, and it is important that we get the balance right. We must think it through. 149WH The Select Committee report and the Government consultation papers mention that the average age of an ELV is around 10 to 12 years. Therefore, sometimes the assumption is made—I believe that we made it in thereport—that no manufacturer would be unduly penalised if historic car parc liability were adopted. I thought that through, and I am not sure that that assumption is correct. I am sure that over time market share and historic car parc will come together, but when the directive is first implemented, there will be a very large number of very old cars, and the bulk of them will carry the traditional UK names of Ford, Vauxhall, MG Rover and some others. That great and disproportionate weight, falling particularly in the early years, is something that we must address.
Market share is a problem, but if a choice has to be made—I am not convinced that it does—between historic car parc and market share, market share appeals more to me than historic car parc, at least on the basis of ability to pay. I would say that, wouldn't I, because of my constituency interests; but judged on the evidence and on questions of fairness, that approach has more to commend it.
The industry rightly asked us to consider another issue. When considering implementation of the directive, one must also deal with the question of balance sheets and book value of companies. One can put a figure on how many ELVs there are now and how many there will be in the future. If the directive is implemented in such a way that motor manufacturers have to put in their books a reserve specifically to cover the cost, the solvency of companies of any size, whether Ford, Toyota, MG Rover, would be affected in theory, and in the case of smaller companies such as MG Rover, the impact might not be theoretical, but real. It is therefore vital that the directive is implemented in a way that assesses liability for ELVs on the basis of contingent liabilities rather than specific reserves in companies' accounts. There is a way to do that which could make a big difference.
Secondly, there is the issue of how we in the UK deal with the directive compared with other parts of Europe. I am pleased that the Government have said in their evidence to the Select Committee, and in their consultation document and response. that they want a broadly level playing field for the implementation of the directive. It is right that we implement the directive properly and thoroughly, but in a climate as competitive as that of the motor industry, it makes no sense at all—indeed, it would damage competitiveness—to implement it overzealously or in a way that brought forward UK time scales. I have reason to believe that that will not happen. I hope that all Government signals will indicate that it will not happen. I commend staying on that course to them.
Thirdly, we have the question of who ultimately pays, and the relative responsibilities of the final user, car owners in general, vehicle manufacturers and the disposal and dismantling industries. The worst thing about the discussions is that there has been no consensus on how policies should be implemented or on the relative responsibilities of different players. We expect different industries to argue their corner and act in their own interests, but every industry involved in this issue has been blatant about doing so, and the end result has been that it is virtually impossible to get an agreement on how to go forward.
150WH The British Metal Recycling Association has rightly and understandably argued that if dismantlers and shredders are to pick up the tab and they are expected to make the investment necessary for the disposal and de-pollution of vehicles, it could have a big impact on their profitability, especially if dismantlers pick up the more profitable ELVs before they reach the shredders. The association also rightly draws attention to the fact that the value of scrap materials such as metal and glass has decreased. It urges us to consider the establishment of a central fund, perhaps financed by the vehicle manufacturing industry, but more likely—according to its evidence—financed by an addition to road tax or some other fee paid by car owners. It says that that would offset the extra costs that the disposal industry will have to bear.
Those are serious comments, which we should take seriously. However, we must also consider the small print of the disposal industry's comments. In the brief provided to Members of Parliament, the association says:The BMRA therefore believes funding of de-pollution for all vehicles (including positive-value vehicles) needs to be derived from a centrally administered scheme, whether it be via a small increase in road fund licence, insurance premium or an identifiable impost on new vehicle purchases.It is fine to say that a measure that will stop industries going down the pan needs to be established, but we must question the BMRA more closely if it is suggesting that a fund is needed to finance activities, including those involving positive-value ELVs, that would be profitable in any event. That is what the BMRA seems to be saying. If a fund can be made available to the disposal industry and it can name the price for the disposal of ELVs, where is the incentive for efficiency? The industry must answer that question.
I have had some harsh words for the disposal industry, and I now turn to manufacturers. In option 4, they put forward their own plan. It is no surprise that in their evidence the vehicle manufacturers pointed out many of the weaknesses in the disposal industry's arguments. They stressed that, instead of simply giving the disposal industry money to remain inefficient, it must be given an incentive to become more efficient and competitive. The vehicle manufacturers urge on us what they describe as a "market solution". Vehicle manufacturers' option 4 has some features to commend it, but there is a problem: some important questions remain unanswered.
First, option 4 contains no clear mechanism for distinguishing between a positive-value ELV and a negative-value ELV. My hon. Friend the Member for Ochil is right to say that that is a key question. Who decides? Also, when considering the extra costs that the disposal industry will face, the manufacturers say that there could be a subsidy if losses were demonstrated across the industry. That sounds all right, but there is no mention of what will happen to individual companies in individual places and individual sites. Therefore, while option 4 has something to commend it, as does the disposal industry's option, it leaves some important questions unanswered. Both sides have produced figures to back up their arguments that could almost be drawn from a parallel universe.
After the Select Committee report was published, discussions sponsored by the DTI were intended to take place between the various industries involved. I 151WH understand that those discussions have started, but no agreement has been reached. While we as Members of Parliament must put pressure on the Government to ensure that those discussions take place and answers are found, there is also an obligation on the industries to try to find common ground, reach agreement, and produce something workable. If different lobbies simply line up on different sides of the argument without meeting in the middle, the directive will not be implemented sensibly and everybody will suffer, including the poor old motorist.
The matter must be sorted out. Something like a central fund will probably be necessary, but I caution against going back to the days of taxes on new cars. Some years ago there was a new car sales tax that got itself into a great deal of difficulty and was eventually removed. Nevertheless, it might be useful to add something to the road fund licence or elsewhere, which could spread costs across vehicle users over a period of time, as is done in parts of Europe, rather than load it on at the point of sale or at the end. That needs to be thought through, but I do not reject the idea of funding in that way. There must also be funding from the vehicle manufacturing industry. Producer responsibility is in the directive, and we cannot ignore it. To the disposal industry I say that even though it will face extra costs, it is possible that extra business will be created. Therefore, there must also be something in the equation for the disposal industry.
The Government have a difficult job to bring those disparate interests and conflicting pressures together, but it is an important job. The danger in getting it wrong is that the problem of abandoned cars will be exacerbated, not alleviated, by the directive. If the accruals issue is handled wrongly, the theoretical book value of certain motor manufacturers could be adversely affected and the health of certain manufacturers seriously jeopardised. If the accruals issue is handled wrongly in another way, while none of us wishes the cowboys to be in the disposal industry for longer than is necessary, it would be crazy if the directive were implemented in such a way that the legitimate disposal industry's extra costs were not dealt with and the industry was destroyed. 1:f we are to achieve our objectives, different parts of industry and the Government must work together. On the evidence put to us, they are not working together yet. They must start to do so.
§ Miss Julie Kirkbride (Bromsgrove)
It is a great pleasure to follow my parliamentary neighbour, the hon. Member for Birmingham, Northfield (Richard Burden), who gave a lucid exposition of the problems that UK plc and especially the motor industry face over the end of life vehicle directive. Having listened to him with great interest, I am not surprised that many of his friends and colleagues did not want him to explain how serious the matter was. It is enormously complicated and, as he rightly said, enormously serious, particularly for our constituencies of Bromsgrove and Birmingham, Northfield. Many workers at the MG Rover plant live in our patch and the directive will have serious repercussions for them, as the hon. Gentleman spelled 152WH out and as I hope to do as part of our lobbying of the Minister who is obliged to sit here and listen to us for a little while.
I pay tribute to the Select Committee Chairman, the hon. Member for Ochil (Mr. O'Neill), for an honest and detailed report which bears examination and for going through it in detail for those of us who are not as expert in the subject as he and his colleagues. I was a little disappointed that he did not allow me to intervene because I wanted him to explain further how the issues are being dealt with in Europe. He spoke a little, as did the hon. Member for Birmingham, Northfield, about the way in which Europe is dealing with the directive and I hope that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) will be able to help. It seems that other European countries have a lighter touch in the implementation of directives and, having gone further in implementing this directive, they may have relevant examples for the Government to take on board. The Minister was nodding his head just now and perhaps he will be able to help us.
§ Mr. O'Neill
I did not intend to be discourteous. I was coming to the end of my comments and thought I had probably taken too long. It may not be valuable to attach too much weight to international comparisons. It is very difficult to find similar markets, similar climates and so on. In New Zealand. for example, cars may last 25 years because of its climate, but in countries with freezing, salty roads, problems of rust and so on arise. We should not place too much emphasis on international comparisons because various factors may result in cars having shorter lives, so a different format is required for recycling.
§ Miss Kirkbride
I thank the Select Committee Chairman. He spoke as a true Scot. I suppose that the weather in Scotland is a problem for the life cycle of vehicles.
It is disappointing that we are saddled with the end of life vehicles directive, but saddled we are, so we must do something about it. Recycling in general is good and there is scope for legislation. Perhaps one of the benefits of the European Union being more interested in such matters is that it will push the manufacturing industry as a whole into thinking more about its responsibilities to the environment. The more we can do to recycle cars and stop dumping into landfill sites by having a more viable recycling industry, the better. I suspect that the only way to persuade manufacturers to proceed with this important matter is through legislation, which must have a long lead time so as not to affect investment plans and profitability.
I have some sympathy with the comments made by my hon. Friend the Member for Solihull (Mr. Taylor) about the liabilities that are being imposed on manufacturers and how that affects competitiveness among manufacturing companies. Some European manufacturers are more heavily based in the European market and are bound to be adversely affected by the directive, however it is implemented. That will affect the global market and the global competitiveness of those industries. It is a shame that when Europe considers directives, it does not consider the effect on Europe plc, the European car market and the profitability of our car manufacturers. Many are already diversifying into 153WH other markets where profitability may be more easily maintained than in Europe if we continue to impose more liabilities when profitability is under such severe pressure. I recognise that the Minister will have difficulty in sharing the burden, given that he is saddled with the need to do so.
I simply want to add to the comments of the hon. Member for Birmingham, Northfield about the special position of MG Rover. It is not merely a small to medium-sized company but a stand-alone company. The company has no plants in the United Kingdom other than in the midlands, and no plants abroad, so it is a special and unique case. It faces a worrying future with the prospect of the roll-out of the directive.
As the Minister will know, there are signs of optimism at the plant because we are hoping for a long-term deal with China Brilliance. He will also be aware that the models being made at the plant are reaching the end of their life cycle and that a new range of cars must be produced. If contracts are to be signed to create a successor to the smaller Rover car, China Brilliance and MG Rover will need some certainty about the market in which they are investing and the potential liabilities.
Time really is of the essence, because until MG Rover knows its position, it cannot reach a conclusion in its negotiations with China Brilliance or create an agenda for investment in the old Austin Rover works, which are 100 years old. We have significant liabilities in our car parc, which the present company could clearly not sustain. It would be not a severe problem so much as a knockout blow, if the company had to pick up the liabilities as the directive seems to suggest. That would be a bitter blow for those who work there and who have done a magnificent job in the past couple of years pulling up the plant by its bootstraps and giving it a future.
I recognise that the Minister has difficult decisions to make and look forward to what he has to say. Sadly, a decision must be taken, and the sooner it is taken, the better for the people of the west midlands, who need to know what future there is for the plant.
§ Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East)
First, I congratulate my hon. Friend the Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee, on steering us through a complex subject with a great deal of spirit. He did not suffocate the discussion, but kept us focused on the matter in hand.
I also congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on articulating the subject with great passion. Only he could have done real justice to the subject, because it was his idea that we should carry out the inquiry. I am not giving away any secrets by telling the Chamber that. It is to his great credit that the Committee was persuaded to hold the inquiry, and it is no wonder that he speaks so passionately and eloquently.
I do not want to speak for as long as he did, however, as I am aware that time is pressing. I want to focus holistically on the Committee's findings and draw attention to some facts and figures that elucidate the tensions that some hon. Members have mentioned. I 154WH refer to the tensions between the operation of a free market and the need to maximise our nation's potential to meet the end of life vehicles directive.
During the Committee's discussions, we were all conscious of the need to ensure that the British industry remains highly competitive and can adapt to change, while accepting our responsibility for the environmental issues that we have focused on today. We all realise that the growth in the number of motor cars will cause great environmental problems. There are 26 million cars on the road and about 2 million of them are scrapped every year. The growing number of new vehicles means that unless there is a big sea change in the industry's practice, we will have big disposal problems.
The end of life vehicles directive gives us a tough target, which is that 85 per cent. of parts and materials from cars must be reused or recovered by 2007. That is only four years away and it will definitely hit us during the next Parliament. The next target is for 95 per cent. by 2015. That is not far away either. We also have to meet new standards in our recycling facilities, with an associated need to de-pollute cars to aid recycling. Given that we have a largely untraceable scrapping infrastructure in this country, that is a key factor.
Paragraph 13 of the report highlights the present structure, adding that between 700 and 800 scrap merchants are probably acting outside the law and outside the planning regime. Those scrap merchants may be a blot on the landscape to many people, but we must concede that, in their own particular way, they are very good at recycling. At present, the Environment Agency indicates that we have collectively recycled or reused about 75 to 80 per cent. of end of life vehicles, and we adduce in paragraph 12 that that figure was reached without the Government applying significant pressure.
The directive sets the parameters for the first test, and I have no doubt that by 2006 we shall have to increase the level of recycling by some 5 to 10 per cent. In my former life, I was an engineer and worked in industry, so I think that those targets are achievable, although recycling, by its very nature, means that the extra proportion will be more difficult to release into a market environment. We highlighted some of the difficulties in paragraph 15, including the particular problems of disposing of fluids and tyres. However, I believe that, if thought is given to the design and material composition of new cars, we can produce vehicles more suited to being recycled once their days on the road are over.
If investment is based on the assurance that recovery and recycling facilities are to be properly accredited, we can begin to open more end of vehicle life centres, which will be properly managed and controlled. The financial architecture under which the new recycling regime will operate is at the heart of the Committee's report, and we conclude in paragraph 48 that the questions of who pays and how much is important to the implementation of the directive.
Processing end of life vehicles in the fashion proposed is not a revenue-neutral affair. The cost will have to be met by car manufacturers or the last owners of vehicles, through public spending or a combination of those methods. As the last owner of the car is unlikely to pay to have the car taken away, even if a tough certification system is introduced, it appears that a combination of public spending and cash contributions from the 155WH manufacturers is the most likely result. We have to accept that that will affect the price of new cars, and in paragraph 50 we conclude that manufacturers will have to make specific provision to cover the costs of disposal of end of life vehicles, and that new car prices are likely to rise to finance that. We add that the cost of take-back to producers will ultimately be passed on to original purchasers.
As my hon. Friend the Member for Birmingham, Northfield said, we must get our approach right in the coming year, particularly if we are to start planning a new generation of accredited disposal facilities for 2006. In the first instance, we must consider introducing a small financial incentive to bring a car to a facility. There must be a Government guarantee that such facilities will, at the very least, remain committed to free take-back.
We must also examine what market mechanisms exist or are needed to deal with recycled or reused components. Pilkington Glass, the UK's biggest producer of car windscreens and windows, gave evidence that graphically demonstrated the problem, and appendix 8 contains a chart and a detailed explanation. The firm noted that there were immense production quality problems with recycled glass. To put it bluntly, that is not something that companies such as Pilkington would want to contemplate in an ideal world, let alone in the present financial climate.
The same issues arise with waste tyres and plastics, and we must overcome particular problems as regards proper recycling. Granulated tyres can be used for athletic tracks, carpet underlay, and playground and road surfacing. Tyres and plastics can also act as fuel in waste-to-energy plants, although that is definitely an unpopular option for many people.
The simple lesson is that we can implement proper recycling, but that we need a stable financial regime first. Such a regime would allow a recycling operator to invest safely, in the knowledge that he was immune to the swings and variations in the economic cycle of the product that he was handling. The Government can play an important part in that, perhaps by considering some form of tax credit. After all, tax credit schemes are on the agenda thanks to the Chancellor of the Exchequer, who is very good at developing them. Many economists might argue that that would introduce a distortion into the market, but we shall have to deal with the problem in some way. We should tell the European Commission that we can meet the end of life directive, but the competition directorate will have to accept that some form of change is necessary, and we shall initiate an amendment to the financial structures that underpin the markets for the new goods and commodities that will flow from recycling facilities.
I recognise that most of the report is very technical and that it is not the kind of riveting reading for everyone's bookshelves. However, it seriously tackles the issue and recognises the demands of a lightly regulated market and the social need to put the recycling of materials on an important footing. That is important.
The Government can play an important part by setting the agenda and the direction. The Committee examined the issue in great detail because we recognised 156WH its importance. As my hon. Friend the Member for Birmingham, Northfield said, it is crucial that discussions have started between the environment lobby, the waste disposal industry and everyone else who is involved. If we are to make the progress that needs to be made, it is important that the Government give a lead in the spirit in which we tackled the report, and that we get this thing right once and for all.
§ Dr. Vincent Cable (Twickenham)
It is a pleasure to be able to take part in this debate on behalf of the Liberal Democrats. This is a tricky and complicated subject and we are grateful to the Chairman of the Select Committee, the hon. Member for Ochil (Mr. O'Neill), and to others, particularly the hon. Member for Birmingham, Northfield ( Richard Burden), who explained the issues in lucid terms. I took this 110-page document home as homework yesterday, along with the complicated briefs on insolvency law from the Enterprise Bill. Although I did not believe it possible, by the end of the night the stuff on insolvency seemed rather simpler than the material in the report.
I am not sure that as politicians we can greatly advance the detailed arguments that have already been made, so I will content myself with some general remarks about the principles that should apply. I particularly want to tease out an indication from the Minister, who said in early March that he was close to coming to conclusions on the apportioning of costs, of his preliminary conclusions on the principles involved. I hope that we will, at the very least, get that from this discussion.
I want to touch on three basic issues. Lest we lose sight of it, one issue is the principle of the directive. The second is that of the perverse economic consequences of directive-driven recycling, some of which are already upon us. The third concerns abandoned cars—not that this debate is about such cars, but the issue gives us a pointer to the social costs of not having a properly funded arrangement.
The key point is that the "polluter pays" principle must apply. The industry provides an important and valued commodity that generates pollution, not just through the use of fuel but through waste. Somebody has to pay for it. Clearly, we have moved on in the past half-century. During my formative years in the 1950s and early 1960s, books such as "The Hidden Persuaders" and Galbraith's "The Affluent Society" were published. Those books were all about built-in obsolescence in the car industry—mass production based on short life, rapid rusting and volume production.
The industry has moved on a great deal from there. Not all cars have a 27-year life like those Land Rovers, but there has been a lot of technological advance. When I was in the oil industry before coming to the House, we talked about supercars built using light materials, with long life and high fuel efficiency. In time and with prodding, the industry is gradually and slowly moving to technologically satisfactory solutions to environmental problems. None the less, we are left with a big waste disposal problem that has to be faced.
I spoke recently to my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael), who explained to me that among the biggest problems faced by 157WH Shetland is that of a mounting stock of cars, accumulated over a generation or so. The geology of the island does not permit landfill, they cannot incinerate and the economics of a small island do not permit recycling, so they have an ever-expanding mortuary of used cars. Although that is only a microcosm, it illustrates the nature of the environmental problem that must be addressed and ultimately drives the directive. The European Union is applying its environmental standards to a genuine problem that has to be accommodated.
However, we are beginning to realise that setting environmental quotas and targets for recycling can have all kinds of perverse consequences unless they are properly thought through. We have had many examples of that. We have begun to see the impact on the fridge industry and there will be consequences in other durable goods industries as they are brought within recycling directives. Several impacts are already being felt.
First, there is a big impact on the markets for the products that emerge from the recycling process. That has been happening for years with paper. The same is true in the car industry, with recycling having an impact on the market for scrap metal, tyres and glass. Although the response from industry in this debate has largely come from the car makers, the adoption of tough recycling standards has widespread implications for industry, some of them negative. Somebody is paying, and in practice it is those other industries.
The second economic consequence is the creation of a new type of commodity that we have not seen before, a commodity that has a negative value. If a product has to be disposed of at some cost, it is of negative value to the last user when it reaches the end of its life. We shall see more and more such commodities. Unless, as a society, we produce an answer to the problem of negative value, we shall experience more and more dumping—that is a natural human response to holding something that has negative worth.
The third economic consequence is the impact on the economics of the recycling industry. It is clear from the disastrous experiences with refrigerators that, unless the recycling industry is profitable, recycling cannot happen. What emerges clearly to me from the report, as a lay person, is that unless each stage of the recycling of vehicles—dismantling, scrap wholesaling and then shredding—exists and is profitable, there is no mechanism to enable the targets to be met.
As the report indicates, much of the current activity is illegal. It is operating outside proper health and safety standards. If those standards are to be raised, not only must the industries be profitable. but they must operate at a higher cost base as well. Much more money must flow into the recycling industry to make it work. There are serious economic consequences to consider.
My third and general point concerns the abandoned car problem. This is not a debate about abandoned cars, but they are very topical. I noticed that, in his statement earlier this afternoon, the Secretary of State for Transport, Local Government and the Regions was grasping at the issue of abandoned cars in his wider embarrassment, so it is topical. It is important because of the staggering costs involved. It is not trivial—we have all seen the problem in our constituencies and the economic costs are piling up considerably. There are 158WH probably about 2 million end of life vehicles a year. Some 350,000 of those, about 20 per cent., are abandoned at the end of their lives, not because of the directive but because of MOT certification and so on; they are simply left. It costs from £65 to £150 to dispose of each of them.
The worst problem—this is where the massive social cost creeps in—is torching. We all see the growing number of cars that are bombed out by kids. The police and fire authorities estimate that each burned-out car costs them between £5,000 and £10,000. With a bit of mental arithmetic, we can tell that if 20 per cent. of the abandoned car population is being torched at that cost, and with projections that the number of abandoned cars will double, it will cost around £1 billion a year to dispose of the problem. That is a staggering cost—it needs to be set beside all the costs to be borne by the recycling industry, the manufacturers and the car consumers. It must be taken into account in the equation; it is a very big sum.
Although the Government are, creditably, responding—and we support the measures that they have introduced in the Budget and elsewhere—what tends to be forgotten is that such measures reshuffle the cost among different Government agencies. I am not a Birmingham MP, but I understand that the Birmingham scheme is largely led by the police. They have been proactive and are getting rid of abandoned cars. That is good for the council and, to an extent, the fire brigade, but the police pick up the cost. The Maidstone scheme, which was encouraged by the Government as a pilot, is another good and successful scheme. That is led by the council, which is helping the DVLA to save a lot of money. That may help the police and the fire services, but the council is footing the bill, and it is a large one.
There is a large social cost to consider, and I argue strongly that any financing solution that leaves the costs in the hands of public authorities is not acceptable. That is why we should not favour the option 4 solution, which has been proposed by the industry. Anything that leaves cars in the hands of their last owners as commodities with negative value will lead to a massive proliferation of the abandoned car problem, with enormous costs to society, so we should not be contemplating that option. The question then arises of what other possible options there are for handling that set of problems. The hon. Member for Birmingham, Northfield has talked us through the various options in a fair-minded way, and I cannot add much to what he said. There are essentially three options that we should be considering.
The first is the simple idea of a deposit scheme for new cars, whereby a person buying a new car pays a deposit, possibly including an element of bounty, which is passed down through successive owners to the last, who can then use the value of the deposit to pay for disposal and perhaps receive a cash bounty on top. Many of us had experience of that sort of scheme as kids who took bottles back to the local grocer. It provides a small cash incentive to be environmentally prudent. Such a scheme would deal with the abandoned car problem and has been tried in many different contexts. Its drawback is that it would not really help us until 2012 or 2015, so there would be a big transitional financing problem. How would we finance the transition until a sensible deposit scheme was introduced? There are two ways of doing that. One is simply to levy the industry, including 159WH importers. That would have to be done on a market share basis. There are obvious problems and inequities with such a scheme, but it would, at least, bring in cash which could be used later to finance the purchase from the last user by the recycling industry. A levy scheme would have some attractions, but for reasons that have already been described, it would be perceived as very unfair by those car companies that are relatively new to the market.
The second scheme, with which I have some sympathy, would be to set aside a segment of vehicle excise duty for purchasing cars from the end user and prevent them from being abandoned. The problem with that scheme is that, in a general environmental sense, the Government are trying—there is a broad consensus on this—to move away from taxing car ownership through vehicle excise duty towards taxing car use, so that option would cut across public policy, although the Government should consider it.
In conclusion, I hope that whatever financing mechanism the Minister comes up with will not leave responsibility in the hands of the last user, because that is the road to disaster and to the massive proliferation of the highly antisocial abandoned car problem. I hope that the Minister will give us some indication of his thoughts on that.
§ Mr. Philip Hammond (Runnymede and Weybridge)
Not for the first time, I find myself agreeing wholeheartedly with the principal conclusion of the hon. Member for Twickenham (Dr. Cable). I, too, want to say something about the problem of leaving responsibility with the last user of a vehicle.
Although I am now privileged to be a member of the Trade and Industry Committee, I was not a member when the Committee prepared the report, so I came to it in the same way as the hon. Member for Twickenham did, taking it home and reading through it as a layman. I am somewhat disappointed that I was not a member of the Committee at that time, because it is an excellent report. I congratulate my colleagues on the Committee on its quality and the hon. Member for Ochil (Mr. O'Neill) in particular on his presentation of the report to the Chamber this afternoon.
I know that my hon. Friends the Members for Huntingdon (Mr. Djanogly) and for South Cambridgeshire (Mr. Lansley), both of whom are members of the Select Committee, would have very much liked to be here this afternoon but are unfortunately detained in the Standing Committee considering the Enterprise Bill. I am sure that they would want to associate themselves with my compliment to the Chairman of the Select Committee.
We all recognise the problem that the EU directive attempts to address, and we all want to ensure a system that delivers environmental benefits and works in practice. The EU directive was not conceived to deal primarily with the problem of abandoned vehicles, but in the UK context the impact on abandoned vehicles will be an important factor, and I shall return to that in a moment. I believe that the watchwords, in seeking to implement the EU directive in the UK, must be 160WH "proportionality"—between the costs imposed on industry and consumers and the benefits that will accrue to the environment—and "practicality" in devising a scheme that is simple, non-bureaucratic and self-regulating, so that it will be easy to implement and easy to ensure that it will meet its objectives. It is not clear to me that the underlying principles of the EU directive are either proportional or practical. I hope that in transposing them into UK law the British Government can do a better job than the EU did in the original directive.
The directive has two primary thrusts. First, it is about ensuring that vehicles are manufactured in the future in a way that makes them more friendly to recycling and that excludes materials damaging to the environment. Secondly, it deals with end of life vehicles and their recycling, take-back and reuse. This afternoon's debate, like the Select Committee's report, has focused very much on the second of those thrusts. Before I join in that general trend, I should like to ask the Minister to address the first issue when he replies—the banning of the use of heavy metals in car manufacture and the targets for changing the nature of motor car production and the materials used in that.
Is the Minister quite satisfied that the objectives are sensible from an environmental point of view and that eliminating materials obviously harmful to the environment will not result in solutions that might, in totality—looking at energy use, greenhouse gas emissions and so on—be more costly to the environment than the problems that they are intended to solve? Is he also satisfied that, on an objective cost-benefit analysis, the elimination of all heavy metals from motor car manufacture is a sensible aim to pursue? I want to ensure that we are not jumping out of the frying pan into the fire.
Returning to the principal issue of the take-back and reprocessing of end of life vehicles, there is a problem of considerable scale, which the hon. Member for Twickenham identified. Using the brief that the Automobile Association has kindly circulated to Members, I can illustrate chat by looking at the 1989 cohort of vehicles. In 1989. 2.296 million vehicles were registered in the United Kingdom, of which just over 1.5 million were re-taxed in 2000. That leaves 787,000 vehicles untaxed, of which 145,000 were declared scrapped and 18,000 were officially off the road. That means that some 600,000 1989 vehicles are unaccounted for. They are either driving around the roads untaxed, or have been scrapped without being officially declared scrapped and deregistered, or have been abandoned somewhere.
§ The Minister for Industry and Energy (Mr. Brian Wilson)
Or they are in Shetland.
§ Mr. Hammond
Or, as the Minister says, they are piled up in Shetland, competing for space with the mountain of fridges following close behind them.
§ Mr. O'Neill
I do not think that the hon. Gentleman has given proper weight to the possibility that a number of those cars have been exported to other countries. 161WH When they are traded in, many cars are now exported in bulk to eastern and central Europe, where there is a market that did not really exist in 1989.
§ Mr. Hammond
The hon. Gentleman is absolutely right. I am glad that he has raised that point, which came out of the earlier contribution of my hon. Friend the Member for Solihull (Mr. Taylor). Some vehicles, especially those of higher value, are exported. I am not an expert in the matter, but I assume that the proper procedure when exporting a vehicle is to notify the DVLA and for it to be recorded in the same way as a vehicle scrapped. I also assume that the AA would have taken account of that in its figures.
The hon. Member for Ochil raises another interesting issue, which is that we will have to address the question of exporting our problems to third world countries. That issue often arises when we talk about tightening regulations in the European Union. What will we do about vehicles that are exported, either to avoid tough regulations and tough regimes here or for genuine economic reasons because they have a value, and are subsequently scrapped in an environmentally unsatisfactory way outside the European Union? I am sure that in addressing the requirements of the directive, the Government would want to ensure that we do not inadvertently create incentives to export vehicles that are then scrapped outside the United Kingdom.
Currently, the industry is recovering and recycling about 75 per cent. by weight of all end of life vehicles, and has set a voluntary target to increase that figure to 95 per cent. by 2015. Those figures have been quoted before, and it is very interesting that 75 per cent. recycling is being achieved entirely by the marketplace. We have to consider that against a backdrop of scrap metal values that are radically lower than just a few years ago. The figure was about £35 a tonne for scrap ferrous metal in 1998, but is now down to about £10 a tonne. That is a fundamental problem of any market-based recycling scheme. Supply and demand in the marketplace may be affected by such schemes and depress the values of the products produced by the recycling process.
The end of life vehicles directive introduces three issues that are new for the UK vehicle reprocessing or end of life vehicle handling system. The first is the concept of free take-back, and I shall say something about that in a moment. The second is the concept of de-pollution as part of the processing system. At the moment, most vehicles are simply stripped of any useful parts and then crushed with their polluting contents left inside. The third is the concept of authorised treatment facilities: registered plants that would deal in a compliant way with vehicles turned in for end of life processing. The Government's own estimate of the administrative cost of running an authorised treatment facility is about £12 per vehicle processed. That is not an inconsiderable sum just for dealing with the administrative issues involved in the operation of an authorised facility.
To establish authorised facilities will require major investment. We do not have them in the UK at the moment. We have had one or two fairly graphic illustrations of how the vehicle dismantling business operates in the UK. I know that in some European countries it is a very different, much more capital 162WH intensive industry, which is conducted in closed plants, not under railway arches or in odd yards at the side of railway lines. Clearly, a large investment will be required in the UK dismantling and shredding industry to deal with those issues.
The hon. Member for Twickenham made what I think is the key point that we have to focus on in this debate. In the absence of anything that addresses the problem, negative-value end of life products will lead to more dumping. That is especially true in the case of cars, when the last owners are typically marginal owners, as the hon. Member for Ochil explained earlier. They are people who cannot afford newer vehicles and use vehicles on the margin of serviceability. It is a sad fact that many of those vehicles will be operated on the margins of legality—without MOT certificates, road tax and possibly without insurance. A significant number of vehicles on our roads are without insurance. I suggest to the Minister that anything that attempts to apply the stick to the final owner of a vehicle to get them to behave responsibly is likely to be a misguided approach that is bound to fail.
Although there will certainly be responsible last owners of vehicles, it is a fact that many last owners will not be able or willing to behave responsibly if it costs them to do so. We can have any regime that the Minister cares to propose. We could charge people £1,000 if they do not scrap their vehicles through an authorised treatment facility, but the general lesson from collecting fines and penalties in the courts is that one cannot squeeze from a stone what is not there. It is no good talking about a group of people who, almost by definition, are among the poorest in our society and saying that we will make them behave properly by threatening to fine them £1,000.
We have to address the problem through economics. Consider a situation in which the value of an end of life vehicle were high enough to support the de-polluting, dismantling and shredding process. If the value of the products coming out of such a vehicle exceeded the cost of the dismantling, shredding and de-polluting process, it would not have a negative value. Indeed, it might even have a positive value, which would start to address the problem of incentives for last owners. I submit that if the system is going to work, we must support an economic value in end of life vehicles that is sufficiently high both to pay for the dismantling, de-polluting and shredding process and to provide a value to the last owner for turning a car in. Instead of using sticks, we should use carrots. That would lead to a situation in which the end user would almost always turn in the car in practice because it had a cash value. If they dumped it, as with the deposit bottle example, someone else would pick it up and turn it in because a cash value was attached to it.
If we go down the route of looking at market-driven solutions, we will be able to avoid the bureaucracy and complexity of some of the other proposed solutions. A market-driven solution clearly involves attaching additional value to end of life vehicles, and there are a number of ways in which that might be done. It is also worth noting at this point that anything that can be done to support the marketplace in dealing appropriately with end of life vehicles will avoid one big problem that other Members have identified during the debate—the historic car parc. For reasons that are probably known to those who have been involved with the issue for a long 163WH time, but are not known to me, in this context the historic car parc is spelled with a "c". I do not know whether that is a gesture to the debate's European origin, and perhaps the Minister can enlighten me during his winding-up speech on why it is a car parc.
§ Mr. Hammond
The Minister probably has more resources of enlightenment available to him in the Chamber than I do.
I should like to see a solution that works by attaching a positive value to all end of life vehicles. That leads me to raise another important question about the motivation behind the European directive and its wording. I acknowledge, as other hon. Members have, that vehicles scrapped to landfill are, on the face of it, a significant source of waste, but in the United Kingdom they represent only 0.3 per cent. of controlled landfill. Why have end of life vehicles been targeted by the European Union in its first attempt to deal with sources of waste by addressing the problem at the producer stage?
I am curious to know why the directive specifies that producers must meet
"all, or a significant part of, the costs".
If the directive is intended to deal with the environmental issue, surely its proposers should be neutral as to how the cost is borne. I wonder whether the directive arose from green hostility to the motor car industry. The motor car represents the preferred target for the green lobby, which is a powerful force in the European Union.
The directive will impose a significant cost—I believe about £300 million a year—in the United Kingdom and, if I read the Department's analysis correctly, will deliver about £1 million of measurable benefits. Any proposal to impose a £300 million cost to deliver a £1 million measurable benefit deserves serious scrutiny, and that was what the Select Committee sought to do in its inquiry.
As I understand it—the Minister will no doubt correct me if I am wrong—if an end of life vehicle has positive value at the point of scrapping, whatever process we use to ensure that positive economic value attaches to it, the part of the directive that says producers must
"meet all, or a significant part of, the costs"
will not apply, because there will be no cost at the point at which the vehicle is scrapped: the vehicle will have a positive economic value. An economic mechanism will have to be found to attach that value to the vehicle. There is no reason why that could not still be funded partly by the producers, if that were considered appropriate, but that would be a domestic issue that the Government could debate with the various economic players and with representatives of consumers and motorists, without being driven by the constraint in the directive that the producers must
"meet all, or a significant part of, the costs".
In an ideal world, the value of the extracted salvage materials and components, driven up by increasing demand supported by regulation for use of recycle 164WH materials in production, would ensure that the end of life vehicle had a positive value. It is conceivable that on the distant horizon, when recycling has become part of our culture as a result of legislation, the market will naturally deliver a positive value to end of life vehicles, but we all recognise that that will not happen in the short term. In the short term we will have to find a way to attach a bounty to the end of life vehicle, to ensure that its positive value in the hands of the last owner is a sufficient incentive to him to turn it in and pay for the proper destruction process. That could be done by a premium on new vehicles, as has been suggested. I can see no reason why a premium on new vehicles, on a pay-as-you-go basis, could not fund the system from the outset. It could be achieved by a levy on the road fund licence, a small charge per annum, so that each owner throughout the life of the vehicle contributed to a fund attaching to the vehicle. The hon. Member for Twickenham said that that would cut across other thrusts of public policy, which are moving away from the vehicle excise licence towards taxation that reflects usage. If that is the case, we could consider a levy on vehicle insurance that attaches to the annual use of the vehicle. Or, disposal could be funded by producers on an historic basis as vehicles are scrapped, which would raise some of the problems to which other hon. Members have alluded.
Are the Government willing to sidestep the intention of the directive, which appears to be that producers should pay? Does the Minister agree that a methodology that avoids placing the burden on producers should be considered? Does he agree that by using a market-supported mechanism to ensure that end of life vehicles have a positive value, we can sidestep the directive's requirements on producers? As the Government know, the alternatives could threaten the UK motor industry's competitiveness with additional annual costs of £300 million to £500 million, which are the figures that I have seen. and may place an intolerable strain on the balance sheets of individual companies. The hon. Member for Birmingham, Northfield (Richard Burden) alluded to that.
I am not an accountant, and I know that the Government have taken specialist advice on how such contingent liabilities would be treated in the balance sheets of motor car companies. However, accounting standards evolve. I would be very concerned about UK manufacturers having those contingent liabilities hanging over them. Even if there were a way to keep them off their balance sheets under current accounting standards, there is no guarantee that they would not have to take them on to balance sheets in the future, with all sorts of ramifications, such as breaches of banking covenants and so on. That might have serious consequences for UK competitiveness, for the survival of UK companies and, consequently, for employment in the UK.
Having considered all the briefings that I have been sent and having read the Select Committee's report, I am tempted to think that some kind of levy on the vehicle as it goes through its life, to which each successive owner contributes, would be a sensible approach to the problem. It would lock in a fund of value that travels with the vehicle to its grave, not wishing to sound too rhetorical. 165WH To many people, it would be superficially attractive to talk about making the producer pay, but we all know that the producer never really pays. It is the consumer who pays. We are simply discussing the mechanism by which we impose an additional burden on consumers, whether as a charge on producers that would be passed back through higher car prices or as a levy on annual car use through a surcharge on the vehicle excise licence.
My hon. Friend the Member for Solihull raised some fundamental questions about the direction in which the EU directive takes us. As the hon. Member for Twickenham pointed out, it is not the only one, although I think that it was the first off the block. Like it or not, we are moving into an environment in which manufacturers will not be able to kiss goodbye to their products at the counter or showroom door and disregard questions of ultimate disposal.
I share some of my hon. Friend's concerns about travelling in such a direction, but we have to face the fact here and now that the directive is in place and the United Kingdom is required to transpose it by April 2002. Notwithstanding my chastisement by the hon. Member for Ochil, that date has already passed. I was interested to read in The Guardian on 20 March 2002 an article about the fact that the date would soon have passed. It said:The next deadline, this time for cars, is April 21. This is a new regime for disposing of scrap cars without spilling oil and other nastier. The problem this time is not lack of machinery, but who is to pay … since scrap metal merchants say they do not make enough from recycling to pay the cost. They would, they declare, simply refuse to take old cars. The prospect of adding another million or so dumped cars…to the piles of fridges terrified the Government. But Meacher"—that is to say, the Minister for the Environment—
"said the Government had come up with a simple solution: "We won't do it." A delightfully honest man, he explained that the EU does not prosecute for non-compliance of directives for six months or so. That gives the Government breathing space".
Opposition Members would welcome any sign that the Government have decided to be less assiduous in implementing EU directives. Many in industry have always suspected that we are a little too enthusiastic in implementing EU directives compared with our European neighbours. If the Minister for the Environment is now espousing as Government policy the proposition that, because the EU does not prosecute for six months or so, we will in future not implement directives until they are at least six months over their due date, that might be generally welcomed by industry.
We shall have to implement this particular directive. Opposition Members want to ensure that, in implementing it, the Government impose the minimum possible cost burden on industry and extract the maximum environmental benefit from the costs that are borne. I urge the Minister to commit himself to making a proper cost-benefit analysis, on an item-by-item basis, where environmental benefit is being claimed, to ensure that what we are doing in the spending of money to achieve environmental benefits makes common sense. I urge him to ensure that the directive is implemented in a way that supports and enhances—certainly that does not degrade—the competitive position of British industry and, crucially, that is not bureaucratic. That is why I suggest that the Government should look at market-led solutions that support the market and the 166WH end of life vehicle value, rather than complex schemes paying rebates against documentary evidence, which will involve the Government in a complex stream of documentation.
A market-led solution, however the value is attached to the end of life vehicle, will require a competitive shredding and dismantling industry to support it. The Select Committee report clearly signalled that. That will require investment. We do not currently have, in the UK, the capacity to implement the directive. I am not trying to score cheap points by keeping on mentioning fridges, but everyone will want to ensure that we do not end up with the fridge problem or the Shetland car problem. We do not want piles of cars heaped up, waiting for the appropriate facilities to be built in order to process them. Investment requires certainty, and certainty, in this case, requires an urgent response from the Government, clearly setting out the mechanism that they will adopt and the funding process to underlie that.
I raise a general issue of importance on cowboy dismantlers. There are all sorts of good reasons to regulate sometimes the way in which business operates, but every time we increase the amount of regulation that surrounds legitimate business, we also increase the competitive advantage of the illegal, illegitimate cowboy business. We make it more and more difficult for marginal businesses operating in the legitimate economy to compete.
The Government must urgently set out the regime that they will adopt and stop telling us that they want to focus on the mechanics rather than the incidence of cost. Those two issues cannot be clearly separated; they are part and parcel of the same problem.
Most vehicles have approximately zero value at the end of their life and, broadly speaking, the dismantling industry is "paying its way"—to quote from evidence given to the Select Committee. It does not make huge excess profits or large investments. The large additional cost that will arise from processing vehicles in accordance with the directive, and the fact that there will be no significant rise in the value of what is being extracted from vehicles, will require additional funding. Hon. Members have rightly drawn attention to the problem of the historic car pare, and to the pitfalls of some of the methods of funding that have been suggested.
We should not go via manufacturers to get to consumers or drivers, which is where the ultimate incidence will lie. We should consider a solution that addresses the problem, that supports the market value of ELVs directly and transparently, and that recognises that the consumer always pays. The interests of consumers, the industry and the environment will be best served by a solution that is market-led.
I ask the Minister for a commitment today that the Government will not bring forward any deadline set out in the directive, as that would risk putting the industry at a competitive disadvantage to its European competition. I ask him not to impose burdens on UK industry that will create an unlevel playing field, which will mean keeping a close eye on the way in which other European countries implement the directive. Most importantly, I ask him to be realistic about last owners of ELVs; they will respond to carrots, not sticks. We must have a regime that not only puts enough value into 167WH the ELV to allow it to be economically dismantled and shredded, but leaves enough residual value as a worthwhile incentive for people who may be marginal users of the vehicle to take the time and trouble to deliver it to an authorised facility rather than dump it at the side of the road or in a public open space.
§ The Minister for Industry and Energy (Mr. Brian Wilson)
We have had an interesting and important debate, to which I am pleased to reply. The debate has reflected the significance of the issue and the complexity of the directive. I have some sympathy for the hon. Member for Twickenham (Dr. Cable) going home with the literature on the ELV directive and the Enterprise Bill—I hope that he managed to fit in time for Manchester United and Arsenal.
The directive is detailed, complex and important. A Bill on ELVs may not be the biggest headline grabber, but we are all aware that unless things are done properly, somewhere down the track they may jump up and bite us. Nobody has a monopoly on wisdom, and I assure all hon. Members who have contributed that their views, which have been knowledgeable in many cases, will be taken fully into account. This will be a holding statement, as well as a response to the report, because the issue is work in progress, for obvious reasons.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) referred to the fact that we missed the 21 April transposition date for the directive. We regret that, because the Government supported the directive, and welcomed its adoption. We support it because we think that it will bring environmental benefits by reducing the waste arising from end of life vehicles, and it will raise the environmental standards of the businesses that treat those vehicles. We want an established network of professional dismantlers, and scrap yards that have carried out sterling work over the years, to benefit from the restrictions that will be placed on those not willing to be properly registered and permitted. We are also committed to increasing UK recycling rates. The achievement of the demanding targets contained in the directive will help us to meet that commitment. For those reasons, we support the directive and we regret the missing of the transposition date.
The other side of that coin, however, is that we are so keen to move ahead with the implementation of the directive and get it right that we think that any delay is justified. It is more import ant to get it right than to rush through legislation that turns out to be ill-judged. That is exactly what my hon. Friend the Member for Ochil (Mr. O'Neill) was saying. It is a complex and significant directive, which has implications for many businesses and organisations, and for motorists. I have been particularly struck by some of what has been said about the implications for the car industry and the lead times that they require. All that has been carefully noted. From that perspective, it is crucial that we get the implementation right. Our discussions with the industry and others are continuing, we are making good progress, and we need to ensure that all the practical implications of the directive are understood.
168WH The other point to make about the 21 April deadline is that all member states are in the same boat. None of them will have completely transposed the ELV directive in time. That is not surprising, because the directive, as adopted, is incomplete. Only in the past fortnight have we seen the Commission's final proposals for restricting the use of certain heavy metals in cars. The Commission has yet to give member states its proposals concerning the detailed rules through which they will be able to demonstrate achievement of the recycling targets in the directive. Transposition by the due date will only have been partial, and further legislation will be required once agreement is reached on the missing elements. Therefore, missing the date is not as grievous an offence as it may have first sounded.
The Select Committee's report was very helpful and constructive. The Government's response to it highlighted several key considerations that we are determined to reflect in implementing the directive. We have always said that we would implement it with a light regulatory touch at first—it is important to re-emphasise that—with the minimum disruption to current market systems and, to address the last point of the hon. Member for Runnymede and Weybridge, without putting UK business at a competitive disadvantage to its EU counterparts. That is one of the three golden rules, and our position has not changed. We also want to ensure that we secure the important environmental benefits of a directive at least cost to the United Kingdom. I agree with the hon. Gentleman's remarks, and that is the balance we want. We want the maximum environmental benefits, but we want to minimise the cost.
We have a very important objective relating to those outcomes, which is to reduce the number of illegal dismantlers and scrap yards that undermine the legitimate sector. There is a list of virtuous objectives, and the debate is about how exactly we will achieve them. Fridges have inevitably turned up—as they tend to do in many places these days. We have heard frequent references to fridges, which is a warning of why we should take our time and ensure that our discussions with industry are complete. We shall also have to ensure that treatment facilities have sufficient time to invest in the right equipment, so that cars can continue to be scrapped. That is what has gone wrong with fridges—the industry is not there to deal with them.
Let me review the main areas covered by the Government's response to the Select Committee's report and update hon. Members on the progress that has been made since that response was presented to my hon. Friend the Member for Ochil. Abandoned vehicles have featured very largely in the debate. They are a legitimate concern, which has been echoed by all hon. Members who have spoken. In our response, we emphasised that we are very conscious of the impact that abandoned vehicles can have on local communities and the cost implications for local authorities, and we have all seen evidence of that in our constituencies.
The announcement on 10 April by the Secretary of State for Transport, Local Government and the Regions and the Minister for the Environment on measures to enable local authorities to deal more quickly with abandoned vehicles—24 hours rather than seven days—and to improve access to DVLA vehicle records will have been welcomed by everyone. The 169WH measures are major steps forward on that front. My right hon. Friends' long-term proposals for tightening the vehicle register will make it more difficult for vehicles to be abandoned with impunity. The measures are virtuous in their own right, but they are also relevant to the implementation of the directive.
§ Mr. Hammond
Does the Minister agree that those measures will be costly and are no substitute for attempting to create a situation in which end of life vehicles are voluntarily delivered by their owners because of an economic imperative, rather than attempting to use a stick?
§ Mr. Wilson
I am about to say something about cost, which is obviously one of the big issues. We are looking at all options, none of which has been closed down. Equally, none is easy and each has its difficulties. If, as a consequence of our implementation of the directive, additional costs fall on local authorities, under the new burdens arrangement it is likely that they will be picked up by the Department of Trade and Industry. There is no doubt that treating all end of life vehicles, including abandoned vehicles, to the new standards required by the directive on the drainage and storage of fluids, which are not currently removed from old vehicles, will involve extra costs.
The potential impact on the number of abandoned vehicles will be among the factors that the Government will take into account when we decide the best option for implementation during the period up to 2007, which is, of course, the latest date allowed under the directive for introducing producer responsibility and free take-back for end of life vehicles. We hope to make an announcement on that in the coming weeks. I had intended to make such an announcement today, and we are close to being able to make it, but we are unfortunately awaiting final agreement from one of the devolved Administrations, which precludes me from giving an answer in debate. We will make a statement soon on the situation up to 2007.
The Select Committee expressed a hope that the present number of illegal dismantlers—cowboy shredders is the colourful term by which they have be described —would be reduced by implementation of the directive. It also expressed concern about the adequacy of the network of authorised treatment facilities—ATFs—that will be able to treat vehicles to the new standards. The directive provides an opportunity to close those illegal operators. who have been able to undercut legitimate dismantling and scrapping businesses over the years.
Operators in the illegal sector will need to obtain a permit under the ATF permitting system, which will be operated by the Environment Agency, and permission from the DVLA to issue electronic certificates of destruction to trigger the removal of an ELV from the vehicle register. Licensed or registered dismantlers and scrap yards, which have been legitimately processing ELVs to current standards, or new businesses wishing to enter the sector, will be given a realistic time in which to comply with the new site and treatment standards. As I said earlier, I want to build on the excellent work that the legitimate sector has been doing, and we are confident that legitimate businesses will recognise the unique opportunity that the directive presents.
170WH The directive requires certain processes to be carried out on end of life vehicles. The dismantlers and the scrap yards have the knowledge and experience to carry out those processes. A captive audience of around 2 million ELVs a year is waiting to be de-polluted and dismantled prior to crushing and recycling. The requirements of the directive will be in place next year and subsequently, so there is a long-term market. It will not go away and dismantlers, scrap yards and others who carry out de-pollution will have the certainty of knowing that their services will continue to be required.
§ Mr. O'Neill
My hon. Friend has not yet addressed the problem of removing the cowboys, which will impose a greater demand for the services of legitimate dismantlers. If they are working to well nigh full capacity now, there will be an increased delay in legitimate treatment because there will not be enough firms to do the work. There may then be a second phase of cowboys who take cars off people's hands. Is the Department considering the possibility of helping businesses that may want to expand? A legitimate ATF may seek planning permission to expand its business but the application may become clogged up in the local authority system and the business opportunity may be lost for months.
§ Mr. Wilson
My hon. Friend makes a fair point that goes back to the issues surrounding fridges. If the directive is to work, it is in our interests to ensure that legitimate businesses are in place before demand increases. I am happy to consider with other Departments any measures to stimulate legitimate business and ease the transition. Officials have made good progress in developing site and operating standards and my right hon. Friend the Minister for the Environment intends to consult on draft regulations before the summer recess.
The Select Committee asked the DTI to set out clearly how the issuing of certificates of destruction would work. Our response was that we would do so and work continues towards that end. The DVLA's pilot project continues to run and officials have encouraged greater participation by dismantlers. The number is increasing and now stands at 38, with a further 38 at different stages of joining. However, we want more to participate because the more businesses that are familiar with the electronic exchange of information with the DVLA, the smoother will be the introduction of the system when the directive is implemented. I am pleased to report that the DVLA is now targeting a further 400 salvage businesses with a view to stimulating their participation in the pilot project. Notwithstanding the comments about the DVLA, we look forward to rapid progress with that project.
The Select Committee registered doubts about the practicality of option 4, but it was suggested by the Society of Motor Manufacturers and Traders to encourage dialogue between car makers and ELV shredders. We have responded to that. The DTI's consultation group was formed to help us to identify the strongest option for implementation and to develop an alternative by bringing together the key stakeholders. Car makers and shredders, with representatives of the dismantling and salvage industries, have discussed a 171WH number of possibilities for distinguishing between positive and negative value ELVs, including the system proposed in option 4.
Option 4 remains under consideration as part of the process, along with the three options set out in our public consultation document. They received varying degrees of support and others have been identified since. All the options remain under consideration and have their pros and cons. One may favour a particular segment of the ELV chain and another may disadvantage a newer car maker to the benefit of longer-established manufacturers. Where the cost falls is at the centre of every business's thinking. The Select Committee's report states in several places and the view has been expressed today that the DTI's consultation paper last year was remiss in not addressing the issue of funding. Our view then and now is that it was better to consult on the mechanics of implementation before deciding where the cost should fall. We wanted consultees' views on the operational practicalities rather than on the perhaps more divisive issue of who should pay. Our consideration of the matter continues and the views that have been expressed today are timely and highly relevant. They will feed into the continuing debate.
The Select Committee noted that if the introduction of producer responsibility were delayed until 2007, it would not expect any particular category of car maker to be excessively penalised. I alluded earlier to the implications of different implementation options in that regard. We are alive to the accounting implications of the various options for deciding exactly where responsibility for the historic car parc—I still have no information on the spelling conundrum—should lie. As we have said repeatedly during the past year, we shall seek to ensure that the UK's approach to implementing the directive does not disadvantage UK business compared with competition in other member states.
I turn to some of the specific points made in the debate, starting with those of my hon. Friend the Member for Ochil, the Chairman of the Select Committee. He mentioned an information programme and, in particular, the use of the DTI website. I accept entirely that we shall have to have such a communication programme and that clear messages will have to be given. The problem at the moment, as hon. Members have probably gathered from my remarks, is that the messages are not all that clear. The information programme must await the key decisions on implementation that we shall have to take in the near future. Those messages will then be promulgated via the DTI website and other channels to heighten public awareness, on which so much of the scheme depends.
My hon. Friend the Member for Birmingham, Northfield (Richard Burden) mentioned orphan vehicles. No matter which system is adopted, orphan vehicles will be a problem. To put that in proportion, they represent about 1 per cent. of the total car parc, and will need to be accommodated under whatever approach we decide to take. On manufacturers that own orphan names, responsibility will depend on the terms of acquisition, but it is unlikely that those terms would include responsibility for obligations that did not exist 172WH at the time. As I said, whatever solution or approach we come up with, responsibility for orphan vehicles will somehow have to be shared around those involved.
§ Richard Burden
The issue of orphan vehicles is a specific one. I am reassured by what my hon. Friend the Minister has said, but I also raised the question of brands that are, so far as I know, not technically orphan brands. It is clear that those brands can be owned by a company, for example, in the case of MG Rover, that is much smaller than the companies that were in existence when those brands were producing cars. My issue was not only about orphan vehicles, but about existing car companies owning brands, which gives them a liability to the historic car parc that is rather out of proportion to their size today.
§ Mr. Wilson
The case of MG Rover has been well made. Obviously, there is a danger that a solution that is right in general could create an anomaly in the particular case of MG Rover because of the evolution of that company and its contraction since the heyday of manufacturing. If my hon. Friend and the hon. Member for Bromsgrove (Miss Kirkbride) can leave that well-made point with me, I can assure them that it has been noted.
The hon. Member for Bromsgrove asked about what is going on elsewhere. No other member state has yet transposed. We understand that France and Germany are delaying producer responsibility until 2007. Denmark has a fee on car insurance that can be recovered when the ELV is disposed of. The Netherlands has a fee on the sale of a new car that goes towards disposal costs. The whole gamut of options is in operation somewhere or other, and that is the range of options that we are looking at. I have a briefing on what is going on elsewhere in the EU, which I am more than willing to share with the hon. Lady and anyone else who would like to see it, without reading the whole thing out now.
The hon. Member for Twickenham mentioned torching. It is important to repeat that local authorities will have new powers to remove abandoned vehicles in 24 hours rather than seven days. That will reduce the incidence of torching, as vehicles usually lie around for a few days before somebody gets round to setting them ablaze. As I have said, the DTI accepts responsibility for picking up additional local authority costs.
My hon. Friend the Member for Middlesbrough, South and Cleveland, East (Mr. Kumar) said that he believed that the 85 per cent. recovery target was achievable. I agree with him. The Automotive Consortium on Recycling and Disposal, an industry group, has reported that around 80 per cent. of the weight of ELV scrap was recovered in 2000, so it is not as if we are starting from a low base. The problem exists at the margins. Industry and DTI research into new uses for recycled materials should help to achieve the increase and take it beyond 80 per cent.
The hon. Member for Runnymede and Weybridge asked about the heavy metal restriction. The directive has been adopted and contains restrictions on the use of heavy metals. What is being negotiated now is a list of derogations—time-limited exemptions and so on. We are seeking to ensure that the derogations are based on 173WH sound environmental and economic analysis. Most car manufacturers are already voluntarily moving away from using heavy metals. I recognise that we cannot suddenly lower the drawbridge without looking at the consequences, so we are taking the approach that I have described, including the possibility of derogations where appropriate.
The question of the export of vehicles arose in an exchange between the hon. Gentleman and my hon. Friend the Member for Ochil. Not much exporting takes place from the United Kingdom, for the fairly obvious reason that not many people anywhere else in the European Union want to buy right hand-drive cars—I do not know whether they do in Gibraltar—whereas many other member states export up to 50 per cent. of their cars as second hand.
The origins of the directive lie in a series of priority waste streams identified collectively by member states as worthy of attention. Producer responsibility was adopted because the sensible view was taken that producers can best design out environmentally harmful materials and design in recyclability.
§ Mr. Hammond
The Minister raises an important point. If the purpose of identifying producers as the people who have to pay is to give them an incentive to design out environmentally damaging materials, that implies that the system must be producer and product specific and there must not be an overall industry pool approach. Is he saying that if he charges producers for the cost of end of life vehicle disposal, he will make his scheme producer specific, so that the amount charged will relate to the recyclability and environmental friendliness of the individual vehicle?
§ Mr. Wilson
I am sure that the hon. Gentleman appreciates that I shall not give an answer to that question today, as it is inherent in the wider questions that we are considering. It is an explanation of why producer responsibility is correct. There is no point in introducing a system that does not place an onus on the producer to make the end product better. With producer responsibility. there is a strong onus on the producer to 174WH change the design in ways that are compatible with the directive's objectives. Again, I am happy to come back to the hon. Gentleman on that point.
Producer responsibility is not an optional element, but is clearly stated in the directive, so it must be reflected in our transposing regulation to the extent that it is in respect of complete end of life vehicles with negative or no value.
§ Mr. Hammond
Does the Minister accept that if end of life vehicles have a positive value, by whatever mechanism that is achieved, there will no longer be an obligation to place the ultimate cost burden on producers, as the EU directive is framed?
§ Mr. Wilson
That is inherent in what I said. The directive does not place an onus on producers for vehicles that have a positive end of life value. The distinction is made in the directive, so there would be a logic in transposing it into our own regulations.
The hon. Gentleman seemed to favour a levy on each owner of the car. That is one of the options that we are considering, but I just put down the marker that it has not been proposed in other EU states, and it is a complex way of doing it because it is a long-term as opposed to a one-off process. I am not shutting doors but simply saying that, like all of the options, it has an upside and a downside.
The hon. Gentleman asked when producer responsibility had been introduced. Fortunately, he did not ask who introduced it. The policy of producer responsibility was introduced by a previous Administration in 1993, and it has been applied not only to vehicles but to electrical and electronic equipment, newspapers, packaging, tyres and batteries. Perhaps a good point to finish on is that the issue is not party political. Everyone has signed up to the principles; we are discussing how to get the implementation right. The debate has contributed to my understanding and, I hope, to the understanding of others about how we should approach such issues.
§ Question put and agreed to.
§ Adjourned accordingly at sixteen minutes past Five o'clock.