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§ Dr. Alan Whitehead (Southampton, Test)Last summer, we had a debate in this Chamber on packaging and waste, initiated by my hon. Friend the Member for Normanton (Mr. O'Brien), whom I am delighted to see here today.
In this debate, I want to concentrate more specifically on the workings of the packaging regulations. Since the previous debate, we have received the report of the Advisory Committee on Packaging, which examined the future of the regulations. In July, a consultation paper was issued by the Department for Environment, Food and Rural Affairs, which largely endorsed the opinions of the advisory committee. The EU directive targets up to 2008 have also been clarified, and the Waste and Emissions Trading Bill, which was a partial response to the EU landfill directive, has been published. It is therefore appropriate to examine this issue now. It is also appropriate to examine it because the questions raised by the Waste and Emissions Trading Bill and the packaging regulations are connected, but the point that we have reached in considering those questions seems to prevent that connection being made.
The packaging regulations deal essentially with commercial waste—in this instance, packaging—but the Waste and Emissions Trading Bill deals with domestic waste, which may substantially include packaging. A good proportion of what is put into rubbish bins by domestic consumers is packaging brought into their houses as part of their consumption of goods.
The packaging regulations have been a substantial success in their own right. Since 1997, the rate of recovery of packaging in the UK has risen from 30 per cent. in 1998 to 48 per cent. in 2001, and the rate of packaging recycling from 27 per cent. in 1998 to 42 per cent. in 2001. In the context of that improvement, we should note that both the Waste and Emissions Trading Bill and the packaging regulations deal with targets. The current consultation paper sets out the next targets that should be reached for packaging. The new targets in the EU directive would require us to raise our game substantially, because 1.3 million more tonnes of packaging would need to be recovered by 2008. Moreover, we would need to meet sub-targets for categories of materials, as opposed to just a general target.
The consultation document also recommends that the increase must include more recovery of reusable commercial materials from domestic waste, but there is no mechanism for reaching targets for particular types of packaging in the domestic waste area, as required by the directive. British Glass, in a recent communication, says that local authorities can reach their targets for recycling and recovery of domestic waste without collecting any glass.
§ Mr. Bill O'Brien (Normanton)I congratulate my hon. Friend on securing this debate. May I draw his attention to a note from British Glass, which states:
Under the UK's free market PRN system we are likely to witness a significant rise in the price of the glass PRN in relation to prices for other materials. This, in turn, will lead to a massive increase in obligation costs for our customers, the packers/fillers and the retailers.23WH I wanted to make that point to my hon. Friend, because the matter is important to the glass industry, and the Minister should take note of what the industry is appealing for.
§ Dr. WhiteheadI thank my hon. Friend for making that point. It is important as a by-product of the targets for separate types of packaging that are being suggested for the future. The suggestion that packaging recovery notes for certain types of waste will increase considerably in price should be a proper concern when determining how the mechanism will work over the next few years. The point made by British Glass is therefore important.
The consultative document also addresses the issue of incineration. As a result of the European Court of Justice judgments and an EU position statement of 27 May on whether incineration constitutes recovery, incineration will have to make up a reducing component of those increased targets. However, the Waste and Emissions Trading Bill envisages an increase in the incineration of domestic waste. It is difficult to see how both could be achieved at the same time.
More is to come. The Waste and Emissions Trading Bill and the Government's waste strategy explicitly accept the hierarchy of waste; that is, the highest purpose is the minimisation of waste, then reuse and then recovery. The relevant packaging regulations, on the other hand, do not do so. They require companies that produce more than 50 tonnes of packaging at various stages in the packaging process and have a turnover of more than £2 million either to recover the packaging, which is to follow through their processes, or to purchase packaging recovery notes from whomsoever is recovering packaging to make up the difference.
I shall now make a bold claim: I have not done the two-year advanced course on the theory and practice of packaging recovery notes. However, I believe that I understand roughly how the PRN system works. Essentially, it is, or should be, a self-balancing market process. PRNs are tradable and vary in price according to the relative recovery performance of obligated companies; that is, if those companies are doing well, the price will be low because there will not be many takers, but if they are doing badly, the price will be high. That price hike benefits the registered recoverers, which are the organisations that take packaging and undertake recovery, because, at least in theory, they will have the proceeds from the sale of PRNs at higher prices to invest in better and more effective recovery processes. That in turn should aid the efficiency of the recovery process, which should theoretically drive PRN prices down over a period. I shall not go into the detail of consortium purchases and the obligations that are entailed, which is an entire sub-study course, but I have described the essential mechanism.
However, that is where the problems between theory and reality kick in. First, in order to assess liability, an apportionment of responsibility must be set out at each stage of the packaging process. There are four stages of liability in the system. A percentage of the liability must be allocated, sometimes somewhat arbitrarily. That may create problems for those who are involved in several 24WH stages and thereby seem to be repeatedly liable for the same processes, while on the other hand other organisations are let off free.
Secondly, there is some incentive to minimise. Retailers should theoretically put pressure on their suppliers to minimise packaging so that their liability for the purchase of PRN certificates reduces, but in reality that pressure exists only when the price of PRNs is high and, because of consortium arrangements, high over a long period of time. When PRN prices are low, as they are and have been over a period, no such incentive exists—one simply purchases a PRN and has done with it. Similarly, there is no pool of funding to improve recycling at the end of the process, so the system fails to encourage minimisation. In any event, PRN income does not go as far as to help develop markets for what is recovered.
Thirdly, there is a reverse incentive, which is to inflate the success of the obligated organisation in recovering its packaging, thereby evading the need to buy PRNs, even though the waste has not been recovered. There is some evidence that the low price is due to that inflation—a press release from the Department for Environment, Food and Rural Affairs this summer showed the results of an investigation into the recovery of wood. That is not necessarily due solely to the fact that fraud is taking place, but because the science of measuring is so inexact in a number of categories that higher claims of recovery are difficult to rebut and are, in effect, almost condoned by the system. It is fair to say that the resources that are available for policing the system—to measure, to prevent fraud and to chase up non-registered free riders—fall way short of the levels sufficient to deal fully with such issues.
The danger is that confidence in the scheme will evaporate: people will go through the motions rather than really work it, because they know that elements of it are not real. If they do take a free ride or inflate their contributions, they may well not be troubled at all.
Despite those problems, the system has made remarkable progress. My concern is not that the system does not work at all, but that because of its perceived inequities, the gap between theory and reality makes enemies of those companies that want to co-operate. I am also concerned that after the consultative document has been produced we will almost certainly proceed with a system that recovers but does not minimise, even though, according to Government policy, we live in a world in which minimisation is a priority and an imperative in waste management. In essence, I am not suggesting that we should have no scheme, but that we could have a much better scheme that embedded minimisation if we worked towards it.
One example encapsulates many of these contradictions. Pallets are ubiquitous in UK manufacturing and bulk retailing. They are literally the base on which almost everything is transported at various stages of manufacture, but especially to retail distribution centres. They are usually made of wood, but need not be. Some pallets entering the UK carry imported goods, but a sizeable proportion is moved internally on so-called blue pallets, which are leased pallets owned by companies such as CHEP and others.
Before the summer recess, I asked a parliamentary question about whether packaging regulations should cover pallets in particular. The Department's short 25WH answer was that they already did. That answer is only partly true. It is true that in the case of pallets that are owned, an assumption is made that the first use is recoverable. An obligation is therefore incurred that amounts to one tenth of the waste arising from pallets because it is assumed that they will make repeated journeys. By and large, however, they do not. They probably last half as long as estimated, but the company can obtain credit by sending broken pallets to be chipped. As far as I can see, that recovery mechanism is inflated to start with. However, those companies whose processing involves packaging do not own blue pallets. Therefore, they incur no obligation at all. It is assumed that the pallets are returned to the lease company and in principle are infinitely reused. Proposals advanced as part of the consultation suggest that blue pallets should be treated similarly and incur a one-tenth obligation. However, blue pallets return to the company only in aggregate. Many are lost, damaged, informally reused or sent for chipping with other pallets.
A good symbiosis of recovery and reuse could be achieved by using recovered plastic to make pallets. Such pallets would reliably last much longer—perhaps 10 times as long—than wooden pallets. There is, however, a capital cost in making them, and since pallets carry almost no obligation under the regulations and will not incur any significant obligation in the future, nothing much will change, even if the consultative document recommendations are accepted. We will have a very leaky system with an inbuilt inflation mechanism, as DEFRA's July press release acknowledged. It may work well despite its shortcomings, but it could work so much better.
My plea is that we take the opportunity presented by the consultative document and adopt its proposals that elements of the system need to be placed on the statute book to develop modifications to the system, but bring it into line with the ambitions of "Waste Not, Want Not" and the Waste and Emissions Trading Bill. That could truly set us on the road to the practical achievement of the waste hierarchy that I believe we all agree is essential for future waste management.
§ The Minister for the Environment (Mr. Elliot Morley)I congratulate my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on securing the debate. He made some important points on packaging, reuse and recycling, and responded to points made by my hon. Friend the Member for Normanton (Mr. O'Brien). The Government have set themselves very ambitious targets. We also have obligations under various directives, as was carefully pointed out.
My hon. Friend made several points. He referred to the waste packaging directive and how it applies to the Waste and Emissions Trading Bill. That is a fair point to make. We acknowledge that our approach to household waste, which involves reducing the amount going into waste streams and reaching local authority targets, is important in moving towards our targets.
We accept that we need to do more work to relate the Waste and Emissions Trading Bill to the directive. As my hon. Friend the Member for Southampton, Test will know, that Bill is going through Parliament now, and we must align those measures properly to get the best 26WH benefits from them. He is probably also aware that we have an Advisory Committee on Packaging. It is aware of the role of the Bill and I can assure my hon. Friend that it is currently considering how we can best achieve synchronisation between the two measures.
I appreciate my hon. Friend's points about separation of waste. He is right that there are individual targets for individual waste streams. Again, we take those seriously. The waste and resources action programme—WRAP—is charged with developing new markets and providing support for the development of recycling.
I take my hon. Friend's point about PRN notes, which have a value in the way in which they operate. I also understand his point about concerns in the glass sector about the high value of the PRN system. However, that can have advantages as well as disadvantages. Of course there is a disadvantage to the glass industry, in that there is a cost in relation to the value of PRNs, but the idea is that when there are limited recycling facilities, the value of the PRN notes will go up. That value then helps to develop the infrastructure for recycling through the inducements that it gives. We are seeing those benefits in relation to the glass sector, but I understand its concerns. I had a meeting fairly recently to talk about some of the sector's worries and ideas. There has been much good work in the glass sector and important advances have been made, but more needs to be done, on glass and on the separation of a range of other waste streams. My hon. Friend the Member for Normanton made that point.
§ Mr. Bill O'BrienI appreciate the Minister giving way. I was making the point that in the present circumstances, the glass industry has one of the best records for recycling material, but in many instances the high price of PRNs, which has to be passed on to consumers, puts glass at a disadvantage on price measures compared with some other container industries. It is against that background that the glass industry wants to raise its concerns about the fact that we do not have a level playing field for those manufacturing containers involving glass and other suppliers.
§ Mr. MorleyI understand that point, but of course other industries are caught by the waste packaging directive. There is also the landfill tax. There are incentives and costs on competing industries, which they have to face. However, I take the point and we are trying to listen sympathetically to what the glass industry has to say. My hon. Friend is right that it has a good record on recycling glass, but there are weaknesses in the sector. The catering and pub trade, for example, have a very poor record on recyling glass, and there are one or two other sectors where more could be done. Nevertheless, that is not to say that the glass sector has not done a lot. Its commitment and the work that it does should be recognised, and I pay tribute to that.
My hon. Friend referred to incineration and the Waste and Emissions Trading Bill. I am not sure that it is fair to say that the Bill automatically assumes that there will be more incineration. He rightly pointed out that the Government have put in place a waste hierarchy. At the top of the hierarchy, of course, is minimising waste. The next, as we go down, is recycling, and then reuse. Incineration is low down on the 27WH hierarchy, although it is above landfill. There are certain advantages to incineration. If it is applied properly we can, for example, recover waste. We can have combined cycle, where incinerators produce both heat and power. We can also get gasification. There are a number of methods for the thermal treatment of waste that can be beneficial.
§ Dr. WhiteheadThe point that I was attempting to address, particularly in the consultation document, was that as a result of the EU opinion in May the likelihood of substantial incineration, which is presently being undertaken and counted as recovering waste and as therefore liable for the issue of PRNs, being allowed is diminishing; it will have to be replaced by other methods of recovery, not including incineration. At the same time in the hierarchy in the Waste and Emissions Trading Bill there is an element—arguably a large one—of incineration, which appears to be increasing.
§ Mr. MorleyIt is certainly true that there is an element of incineration. I would like to come back to the point that we have a clear hierarchy of waste treatment and that incineration is low down on that hierarchy. My information shows that very little packaging recovery—if we want to use the term recovery—is carried out through incineration; the figure is something like 500,000 tonnes out of 5 million tonnes. The impact of incineration on packaging is small, and we need to look at the issues of reuse and recycling. It is certainly true that more reuse and recycling will have to take place, and I accept that point.
I accept my hon. Friend's suggestion that there could be a greater use of recycled plastics in things such as pallets. That is a very interesting suggestion. I have seen some technology used for plastics recovery. It was in south Yorkshire, and the company concerned is looking for outlets for the products that it is producing. Pallets could certainly be among them. Through WRAP, we have the facility to give support, encouragement and financial assistance to the development of new markets and new technologies, and one of those technologies is the use of recycled plastics. That is an area that we must address, in terms of separation and collection, as well as reuse, so my hon. Friend is absolutely right. He will also be aware that we are currently consulting on some of these points. There are proposals in the consultation paper to change the way that pallets are handled under the regulations. We are waiting for information on that.
I listened very carefully to the points that my hon. Friend made this morning, and I am sure that we will include his comments in the overall consultation on the proposed changes. Items not covered at the moment are generally excluded, rightly, because of the provisions for reuse. The proposals apply to wood and plastic pallets. He is right that there have been some questions about the figures for the reuse of wood, and we have adjusted those figures. That demonstrates that, with regard to the targets for particular waste streams, we are careful to ensure that the figures and claims and the PRN notes are accurate and reflect the amount of product that goes into separation and recycling. It is important that we 28WH have a robust scheme that works and stands up to examination, and that is why adjustments have been made to the figures for recycled wood.
§ Mr. Bill O'BrienLocal government plays a very significant part in achieving targets. Will the Minister indicate what further assistance his Department can give to local government? I know that there has been some funding, but we need to do a lot more if we are going to separate the various cycles of waste, and local government can play a significant part.
I also wrote to my hon. Friend about plastic bags and the situation in Ireland, where the tax on plastic bags has reduced their number significantly. Is he doing anything to emulate that?
§ Mr. MorleyI shall take the latter point first because I have had a significant amount of correspondence on plastic shopping bags and the tax that was introduced in the Republic of Ireland. I make it very clear that I am interested in that sort of approach.
As a general principle, the Government have applied a range of financial instruments that are designed to be cost neutral overall but to encourage good practice in recycling. The landfill tax is an example of that. Money is recycled by promoting waste minimisation. That tax is designed to encourage the minimisation of waste going into landfill.
The issue of the Irish Republic is an interesting one, and I am currently looking into the figures on that. We are keen to work with supermarkets to encourage the use of reusable bags; there are good examples of that in our country. I am not sure if my hon. Friend knows that although the amount of plastic bags used in supermarkets in the Republic of Ireland has reduced—the tax has some benefits—the sale of black bin bags has increased dramatically. It appears that many people were reusing plastic bags, particularly for waste, and now that they do not have them in the house any more they are simply buying other plastic bags such as black bin bags. That defeats the object in terms of the analysis of the life cycle of plastics.
The figures need to be examined to assess the costs and benefits, and we are doing that. I have an open mind to this approach and if there is evidence that such approaches work and are beneficial, we should consider them, but we also have to look at the whole impact and the life cycle.
My hon. Friend the Member for Normanton also mentioned local authorities. It is certainly true that local authorities are key players in waste collection and waste minimisation, but they are not the only ones. A lot of packaging and waste is generated by industry and retailers, and they have obligations to deal with that.
My hon. Friend asked what help is available. We have the waste implementation programme that has been set up by DEFRA, which is designed to give advice and support to local authorities about good practice and the steps that they can take to minimise waste, and to share good ideas among local authorities. We also have a further two years of the national waste minimisation and recycling fund. That is a challenge fund with a considerable sum of money for which local authorities can bid for major capital investment.
29WH I have recently been involved in launching several projects in London that have been jointly funded by DEFRA, the office of the Mayor of London and the London recycling fund, which also receives financial support from DEFRA. They have been putting some sophisticated waste separation in place, and there are other investments around the country.
We recognise that local authorities need assistance, which is available for selected projects, but there is wide disparity between the performances of the best and worst local authorities in waste minimisation and recycling. That is not acceptable, and we must focus on those local authorities that are not pulling their weight in meeting targets. I know that my hon. Friend the Member for Southampton, Test will share that objective. He has made some very useful suggestions in the debate.
We have made good progress in recycling and in the recovery of package waste. By the end of 2002, we had 44 per cent. recycling and 50 per cent. recovery of packaging waste. That is up from 30 per cent. recovery and 27 per cent. recycling when the regulations came into force in 1997. That is a considerable increase in a comparatively short time. However, we are not complacent and we recognise that there is much more to do. We have a range of challenging targets and must concentrate on the waste separations and the individual targets for different materials: my hon. Friend the Member for Southampton, Test is right about that. I will take his suggestions away, look at them and include them in our consultation. His input this morning has been helpful and constructive and I will respond in a similar vein.
§ Sitting suspended until Two o'clock.