Environmental Audit Committee
Oral evidence: The National Audit Office Report on Packaging Recycling Obligations, HC 1548
Wednesday 12 September 2018
Ordered by the House of Commons to be published 12 September 2018.
Members present: Mary Creagh (Chair); Colin Clark; Geraint Davies; Mr Philip Dunne; Mr Robert Goodwill; Kerry McCarthy; Anna McMorrin; John McNally; Dr Matthew Offord; Joan Ryan.
Questions 1 - 128
Witnesses
I: Lee Marshall, Chief Executive, Local Authority Recycling Advisory Committee; Ruth Beckley, Director of Compliance, Valpak; Phil Conran, Chair, Advisory Committee on Packaging; Richard Kirkman, Chief Technology and Innovation Officer, Veolia.
II: Dr Thérèse Coffey, Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs; Chris Preston, Head of Resources and Waste, Department for Environment, Food and Rural Affairs; Marie Fallon, Head of Regulated Industry, Environment Agency.
Examination of Witnesses
Witnesses: Lee Marshall, Ruth Beckley, Phil Conran and Richard Kirkman.
Q1 Chair: I welcome our witnesses and guests to today’s hearing, which follows on from the Committee’s previous work on plastics and recycling. We have asked the NAO to review the Government’s packaging recycling obligation system, following on from the disposable packaging inquiry. The report was published in July with significant media attention and, we hope, specific policy attention. We hope it was welcomed by stakeholders. Today’s hearing is an opportunity for us as a Committee to question stakeholders, and also regulators and Ministers, who will be appearing in the second panel.
For the purposes of Hansard, can I ask you to introduce yourselves from my left, please, starting with Mr Conran?
Phil Conran: My name is Phil Conran. I am Chairman of the Advisory Committee on Packaging.
Richard Kirkman: I am Richard Kirkman, Chief Technology Officer of Veolia.
Ruth Beckley: I am Ruth Beckley, Director of Customer Service and Compliance at Valpak.
Lee Marshall: I am Lee Marshall. I am CEO of LARAC, which is the Local Authority Recycling Advisory Committee.
Q2 Chair: We have looked at, and thought deeply about, these packaging and recycling obligations. Mr Conran, obviously you have been party to what the Government is thinking about in terms of the waste and resources strategy. What recommendations have you made to the UK Government about the strategic direction of the system?
Phil Conran: What we have seen so far, really for the last 20 years, is very much a market-driven system that has relied on the market to deliver the targets. The original regulations purely set out to meet European targets at minimum cost. Our recommendation is that we need to take a much more centralised and strategic approach in terms of the management of the system, to provide more investment in infrastructure and better overall control over how we meet future targets.
On top of that, we have the circular economy package requirements, which apply a fundamental change to the way the system has to work.
Q3 Chair: What action do you think will be taken? What are you anticipating? What would you like to see in the waste and resources strategy?
Phil Conran: We would like to see a move away from a system that depends on the PRN being very much a market value-driven system—it potentially encourages short-termism, encourages exports and, to some extent, enables people to take advantage of the system for exports, which is slightly less controlled than that for UK reprocessing—to one that applies a more managed process that sets strategic direction, allows investment in future infrastructure needs and allows the continued use of export but under more controlled conditions, to ensure we do not have some of the issues that have been widely publicised over the last few months.
Q4 Chair: In your opinion, what has made the greater contribution to improved recycling rates: the packaging recycling system, PRNs or landfill tax?
Phil Conran: Landfill tax.
Q5 Chair: Does any member of the panel disagree with that analysis?
Ruth Beckley: It is worth noticing that landfill tax diverts it from landfill but does not necessarily mean it gets recycled. It could get recovered—energy from waste, for example.
Q6 Chair: What percentage of the UK’s waste system goes into energy from waste?
Ruth Beckley: I am not aware of the figures, but the packaging system incentivises at least 80% of a producer’s obligation to go towards recycling evidence, rather than just recovering.
Q7 Chair: Does anyone know what the energy from waste percentage is?
Richard Kirkman: Of total household waste, about 45% is recycled or composted. Of the rest, about half is going to energy recovery and half to landfill still.
Q8 Chair: About 20% or 25%.
Richard Kirkman: Approximately, yes, while we build the rest of the infrastructure to avoid landfill entirely by increasing both energy recovery and recycling.
Q9 Chair: Thank you. Ms Beckley, DEFRA states that the recycling obligation system creates an incentive for companies to use less packaging, as it will reduce their costs of complying with the regulations. Is there any evidence of that?
Ruth Beckley: Companies generally, as commercial entities, look to reduce their packaging, to reduce their costs of compliance but really to reduce the cost of the raw materials. The proportion they pay towards their recycling obligations is not as high as the amount they would pay towards sourcing the raw materials to go into their product. However, overall, yes, if you reduce your packaging on to the market it reduces your compliance bill. When the PRNs are particularly high cost, as they are at the moment, people do tend to look at their operations and at where they can make savings.
Q10 Chair: Do you have evidence of that?
Ruth Beckley: We have evidence of people doing packaging minimisation throughout their product lines, yes.
Q11 Chair: What do you think the objectives of the reformed system should be?
Ruth Beckley: We think there are a number of things that could be reformed and focused on. Particularly looking at a reduction in the de minimis so more producers are obligated and more people are aware of recycling, so more recycling happens overall.
Chair: That is what this Committee recommended in our report.
Ruth Beckley: Yes, absolutely.
Q12 Chair: Do you agree with the 1 tonne recommendation?
Ruth Beckley: In terms of the actual level, I think 1 tonne could be a good point to start. There is consideration around turnover and the tonnage threshold. We have one of the highest thresholds within Europe, by a significant factor, so we do think that is something to focus on. So is focusing on free riders, to bring in the people who should be paying into the system and to make sure the costs are being distributed fairly across everybody.
We agree as well with what Phil said, in terms of exports and making sure there is a level playing field between UK reprocessing and exporters. We think some simple changes could be brought in to make that happen.
Long term, if a higher amount is going to be invested by the producers into the system, in addition to making sure the exports are controlled, our general feedback from members is they would like to see more UK recycling. They want to encourage UK businesses and also have access to that material so they can put it back into their products. They want to try to close the loop in the packaging they are creating and get access to more recycled content. That is an important factor for them as well.
Q13 Chair: Do you agree with our Committee’s conclusion that we should have a minimum 50% recycled PET, for example, to create a market for the products that are being made?
Ruth Beckley: Careful consideration is needed when putting in minimum recycled content requirements, particularly around food-grade packaging and also cosmetic packaging. Some of our members are concerned about strict regimes being put in place quite quickly, and how they might then react in terms of the packaging design and sourcing the materials to go into it. Therefore a careful impact assessment is needed before anything is set in place.
Q14 Chair: Any comments from Mr Kirkman or Mr Marshall?
Richard Kirkman: We do think that that is a missing element among all the different tools that are being put in place: deposit return scheme, packaging recovery scheme and taxes. The missing element is requiring recycled content in new products. There is no requirement for that and there is no method of checking.
We would advocate some kind of escalator—starting at a very low level and going up—giving foresight to business, which they like. Without that, we are currently collecting materials and separating them and they have nowhere to go, because no one wants to put them in their products.
Lee Marshall: I agree with that. It needs to be a complete market in terms of having some of the pull-through mechanisms that mean the materials are wanted. That should increase their value, which has an impact back on to the local authorities and their ability to collect it.
The wider reform of the packaging schemes needs to be reform of producer responsibility, not reform of the PRN system. The PRN system is older than Google and has had very little update in the time it has been in existence. It has shown it can only go so far. As you said earlier, in terms of local authorities the landfill tax was a bigger driver in pushing recycling rates up than the packaging regulations have been, because the funds are not flowing through. Therefore we need to see reform that goes along with the sorts of principles that are in the circular economy package about full cost recovery. That will be a big change for the UK; we appreciate that. However, it is still a change that needs to happen to bring us in line with other countries.
Q15 Chair: What would be the significant change if full cost recovery was introduced?
Lee Marshall: There are two aspects to it. It will allow better, more improved and wider collection schemes to be introduced so we collect more material from the public. It will allow for much more engagement with members of the public. At the moment, recycling is perhaps only so important, and we need to get it to the level where it is important to every individual and they see it like we do as waste geeks and waste professionals. It is also about the infrastructure. It is no good collecting it if we do not have somewhere to take it, as you have already started to hear. That is ideally in the UK, but there is a place for appropriate export markets as well because these are commodities that are traded on the world market. Products that we use in the UK are produced in other countries, so it is right and proper that in some instances they get the materials needed to produce those products.
Q16 Dr Matthew Offord: Moving on from waste itself to minimisation, I want to ask you about the objectives and essential requirements. Are they consistent with the packaging recycling obligations?
Lee Marshall: It depends what you mean by consistent. Their aims are good. I think how they have been enforced or carried out is perhaps not as good.
Picking up on an earlier point, there is a payoff between minimising packaging and reducing your obligations but then, dare I say it, marketing comes into it as a payoff. From a marketing point of view, something that may appear to have more packaging on it may mean you get more sales, and that offsets your increased obligation. As a business, you make the business decision to do that. In fairness to retailers and producers, a lot of light-weighting has gone on in products, although we may not realise it. They may not have reduced in size, but their weight has reduced because the overall packaging used has been reduced.
In hindsight, perhaps the essential regulations should have been enforced at a national level rather than on the trading standards side of things. Unfortunately, when the austerity measures started to kick in, it slipped down the priority list for trading standards because the public were not telling them it was priority. There were a few prosecutions early on, and some of those came about because trading standards were proactive, went out and did a review of packaging and picked over-packaged materials up. There have not been many prosecutions. Equally, there have been instances where they have talked to retailers and producers, and packaging has changed as a result. The prosecution has not come, but the change has come about; that is, in a way, a better result. If you get to the prosecution, you could argue either the change has not happened or it is going to happen too slowly.
Dr Matthew Offord: What does industry think?
Ruth Beckley: We have absolutely heard of companies that have been contacted and have made changes as a result. I do not think there have been many prosecutions, but there are changes. The marketing element is correct as well; it does have an impact. Generally, there has been a significant amount of light-weighting from retailers.
Q17 Dr Matthew Offord: Mr Marshall, you mentioned local authorities, trading standards and the pressures upon their resources. What is your indication of the priority that local authorities and, indeed, local councils attribute to recycling, waste packaging and that kind of thing?
Lee Marshall: There is a mixture of reasons why they give it the priority they do in their local area. Some of it could be historic—they have been leaders and for that particular local area it is important to them, so they have continued with it. Again, to a certain extent it comes back to the pressure and input they get from their residents. If residents are not telling a local authority that recycling should be as high a priority as other services, they will not assign such a high standard to it.
That said, the recycling rate in England is still around 45% which, compared to where we were 10 to 15 years ago, shows it has been a priority. However, as austerity has kicked in, and we have not had the policy framework guiding us as local authorities and other parts of the sector, it has dropped off. I think that is why you see bit of a difference between England and Wales. With the devolved nature of waste policy in Wales, it is very much at the forefront. It is very much a drive from the Welsh Government, which is transmitted down through local authorities that then apply it as a priority for themselves as well.
Q18 Dr Matthew Offord: It could also be due to economies of scale between England and Wales. England has a significantly larger population than Wales.
Lee Marshall: It does and, in fairness, the Welsh Government have put in a suitable amount of funding. As well as making statutory targets and almost forcing the local authorities to make it a priority, they have put in funding as well. That would be of a different magnitude again, obviously, in England because of the population size and density.
Q19 Dr Matthew Offord: In order to reduce packaging, what mechanisms do you think should be introduced? Should there be a strengthening of the essential requirements, or should it be done through the packaging recycling obligations?
Lee Marshall: A bit of both. You could maybe strengthen the essential requirements but also put the resources in to be able to actively police them. As you say, if people are aware that scrutiny is on it, they will start to make the changes.
There is value definitely in mandating certain levels of recycled content. I appreciate that it would be difficult and there are concerns around food-grade packaging, but that will bring about its own innovation. It will be a challenge, but when companies and businesses are presented with a challenge, they are very good at overcoming it and innovating. It is difficult, but there is an opportunity for innovation there through intelligent regulation and things like mandating recycled content percentages.
Ruth Beckley: We also feel it is important to look at the recylability of packaging, not just the recycled content. We would like to see something put in place, either into the essential requirements or into the packaging regulations, to incentivise recyclable packaging or disincentivise disruptive or non-recyclable packaging.
Richard Kirkman: To add to that, the labelling is clearly an important aspect that has not really been cracked yet. Some of the labelling on products is very misleading. Some of the foils have a recycling symbol on them that denotes not that it is recyclable, but that the company has contributed to recycling somewhere in Europe. That kind of confusion for consumers is not helping.
Phil Conran: We also have to recognise that the circular economy package is going to completely change the direction of all of this. Requiring full net-cost recovery to be applied to producers is going to increase their costs. People are talking about between five and 10 times their current costs. That will certainly make a lot of producers, retailers and manufacturers sit up and perhaps look a little bit more closely at the amount of packaging they are using and the costs associated with its recovery, and therefore make it easier to recover and recycle as well as minimising. We are on the cusp of change; there are no two ways about it.
Q20 Chair: In response to my question, you said there is full-cost recovery. Are you expecting to see the reform of PRN and the waste and recycling strategy reflect that new circular economy package?
Phil Conran: Absolutely.
Q21 Chair: Thank you, that is very helpful. We are going to move on now to questions on system revenue transparency from Colin.
Colin Clark: What clarity has the Environment Agency’s introduction of spending categories brought for stakeholders in the system?
Ruth Beckley: People are not actively aware of the information that is available. When we make our customers aware of it, they are interested in that information and the level of granularity it provides. However, within those categories it could be used differently by different reprocessors as to how they attribute their spending within those categories. The guidance around what goes where is not necessarily that clear. We would like to see more transparency within that spending, particularly if the costs are going to increase and there are going to be significant extra monies put through.
The other interesting thing is that there used to be a requirement on the reprocessors to have an independent audit report to verify that what they were declaring was accurate. That was taken out because it was seen as administratively burdensome for the reprocessors. It was taken out around the same time as operational plans were removed for schemes, whereas we felt that it was a good extra step.
Q22 Chair: When was that taken out?
Lee Marshall: Four or five years ago.
Q23 Chair: About 2012?
Lee Marshall: Something like that.
Q24 Chair: There would be an external audit of where their money was going, and now we just do not know.
Ruth Beckley: Yes, how they declared it and the overall numbers. They do not have to do that any more.
Q25 Colin Clark: On that point, companies have questioned the system because boundaries were not clear; they seemed to be blurred. The NAO report states that some companies allocated planned activities to multiple spending categories. Is this justified, given that very little information is provided about the spending activities?
Ruth Beckley: I do not fully understand the question; sorry.
Colin Clark: Is there a weakness in the system that because there is a blurring of the categories, there is no clarity about what the companies are actually doing?
Ruth Beckley: Yes.
Q26 Colin Clark: Is the quality of what is coming out of it worth it, if the companies are allocating across the categories?
Ruth Beckley: As an overall sense of what they are doing, it is interesting information. In terms of giving anything concrete, it does not do that.
Q27 Colin Clark: If you have 10 different companies you may have an interpretation of what the boundaries are—
Ruth Beckley: In different ways, yes.
Q28 Colin Clark: Moving on, what is the mechanism for funding local authority collection through the PRN system and how could it be reformed to ensure greater levels of producer responsibility? We have read in evidence that LARAC estimates English authorities are spending £600 million.
Ruth Beckley: The PRN funds that we provide to reprocessors go to the reprocessors for the collection and reprocessing that they are doing. The assumption is that some of that will get passed down the chain in the material value, for the materials they are collecting from local authorities. That will often depend on the contract structure a local authority has set up between that local authority and the waste collector providing that service to them.
Phil Conran: The value of a PRN is very much related to the supply and demand of PRNs, not to the actual costs involved in collection. If you look at cardboard, for instance, up until this year it has been around £1 a tonne. This year it has gone up to £15 or £16 a tonne, simply because the targets look as though they are going to be tight to meet this year. The PRN value, from that point of view, is not, if you like, a key contributor to recycling levels for local authorities.
Q29 Colin Clark: Putting that into layman’s terms, does that mean that it is or is not working—that it is more relative to what people are trying to achieve as opposed to the actual recycling?
Phil Conran: It is a bridging mechanism. The price will go up as demand increases, because the recycling targets are looking as though they might not be met. That will pass more money into the system, and for that year we might well see that more material is collected and recycling targets are met.
To some extent it works as a bridging mechanism, but because it is so volatile, it does not give reprocessors the ability to invest in future infrastructure.
Q30 Colin Clark: They cannot take a long-term view?
Phil Conran: They cannot take a long-term view.
Q31 Chair: Does it help reprocessors to stay in business, as a form of market support?
Phil Conran: It does with some, certainly. There are some reprocessors that would struggle without that PRN value. However, they find it difficult to plan for the long term because one year it might be £5 and the next year it might be £50.
Chair: Thank you, and sorry to interrupt.
Richard Kirkman: As a reprocessor, we have made a lot of investment decisions on the back of what we believe the PRN value to be. However, there is then a pressure on materials being exported, because the PERN is of higher value than the PRN, so things are being exported and people are not investing in the UK. It is being diverted and people are being paid more to export it.
Colin Clark: It is driving an export market rather than investing in your domestic market.
Richard Kirkman: If you look at the figures and graphs in your own report, you can see that it is a flat line on UK infrastructure and it has jumped up on all the categories for export. There needs to be some advantage to doing the processing in the UK. Then you will see the investment here and will have an audit trail for that because plants will be built.
Ruth Beckley: We have suggested before an “of which UK” target for recycling, phased in over time to allow the infrastructure to come into place. That would level the playing field and give an incentive for more UK recycling. However, there are concerns about trade issues with having something like that in place currently.
Q32 Colin Clark: That brings me to my last question. Is there an industry appetite to contribute more money to the system if the investments were more transparent? We have heard that up to 84% of respondents thought the system was not really transparent.
Ruth Beckley: Yes, we think there is an appetite to put more money in. Businesses feel they can, and should, be doing their fair share in terms of helping the environment and taking responsibility for what they are putting on to the market. They would like to see more UK recycling as a result of that.
The other thing they would like to see is more consistent UK-wide collections, so that if businesses put a product onto the market, they know that when they say it is recyclable, it really is recyclable everywhere in the UK. That is something that they are particularly focused on. They would also like to see innovation and investment into future recycling.
Lee Marshall: In terms of consistent collections, they are only a function of the products that are put on the market and the end markets for recycling. Consistent collections can only really happen when you have more consistent products put on the market and when you have the end markets available. That way, you will get consistent collections. For plastic bottles, cans and paper there are consistent collections across the UK already. Every household has access to those at the kerbside. It is when you start getting into things like pots, tubs and trays that there are differences, because of the end markets that are being supplied and the capabilities of the different sorting facilities.
Ruth Beckley: That is where we think some kind of recyclability incentive that links in with what is actually—not technically—recyclable within the UK is important. That also links back to the labelling point. You then either have recyclable or not recyclable, with nothing in between.
Lee Marshall: You could check locally. Going back to your previous question about whether the PRN system is working for local authorities in terms of funding collections, no, it is not.
Richard Kirkman: The PRN system probably is not best placed to be doing that. The PRN system is there to develop infrastructure and should go to reprocessors—or arguably even further downstream to people who are putting it into products, because then you pull the material. If you were to give the money directly to local authorities, you would probably end up collecting things that did not have an end market because you would be incentivised to do it.
However, in order to change the collection systems to a more uniform system across the UK we really think local authorities need the money, which would best come from a non-recyclability tax that the Treasury is currently considering and will probably be announced in the Budget.
Chair: To be revealed in a slightly later than usual Budget, we believe.
Phil Conran: Can I add one further matter? 90% of producers have no interest at all in the PRN system or what happens. They see it as a tax. Once a year they have to get the data together and they register. Most of them do it through a compliance scheme; they are detached from the system. Once they have it out of the way in April, that is it, and they go back and do their day job. We can over-generalise about the amount of interest that producers have in PRN transparency. Most have no interest at all.
Colin Clark: It is simply ticking a box.
Q33 Chair: We are going to move on to contamination and exports.
Mr Goodwill: Thanks very much indeed. We heard before the summer that the domestic recyclers were aggrieved that the PERN was credited at 100% despite the fact that there may be quite high levels of contamination. It seems we were blissfully unaware of some of the high levels of contamination. It was the Chinese themselves who picked up on this and brought in the ban.
Can I ask Mr Kirkman about this, initially? The average contamination rate of a bale of plastic recyclate from a materials handling facility in the UK is 9.5%. How can internationally acceptable contamination levels, of around 0.5% to 2%, be achieved at this stage—or are they achievable?
Richard Kirkman: The 0.5% to 2% is more related to fibre products than it is to plastic products. It is very product-dependent. In plastics, it was much less clear. You would normally export paper as a fibre product—either cardboard or mixed paper—and there the levels of contamination are set at 0.5% to 2%, which is achieved.
For mixed plastics, it is a very different and greyer area. You will have a bale of different types of polymer together, potentially all recyclable or potentially some not recyclable. That is where the grey area existed. You could have contamination of those mixed bottle bales that were going to China, and China closed that down.
For people who were acting responsibly and not exporting those bales with high levels of residue, this was very good news because it immediately contained the material in the UK. This has worked to the UK’s advantage and we see it as a good thing.
Q34 Mr Goodwill: Was the Chinese move in effect a ban but they could not ban it for trade reasons, or were they genuinely expecting us to up our act and send more uncontaminated material to them?
Richard Kirkman: I think their view is they do not want to take the residues into their country and have to deal with them there; it should be dealt with at source.
Q35 Mr Goodwill: Turning to Ruth Beckley, the NAO notes that compliance schemes are one of the Environment Agency’s main preventative controls. How do you tackle fraudulent exports of contaminated waste?
Ruth Beckley: We are not a control for exports. We are a control for members’ data being submitted accurately, to make sure that information is correct. In terms of exports that is down to the accredited exporter, and the Environment Agency enforces the rules and the accreditation around that.
We do think there is an imbalance in the fees the Environment Agency receive for that work. For a UK reprocessor, they receive over £2,000 for each site that a reprocessor registers to do necessary inspections, whereas an exporter pays £85 for the first site they want to use abroad and then £35 for each site thereafter. That does not give the regulator the necessary funding to do the enforcement we think is necessary to make sure exporting is done properly.
The other thing we think could be considered, particularly for plastics, is an export protocol. If you export 100 tonnes of plastic, you can only issue a PRN on, say, 75% of that unless you have sampling regimes to demonstrate you are meeting higher levels of that exporting material going overseas.
Q36 Mr Goodwill: You are saying the amount of compliance and what you can do is limited by the income you get for that.
Ruth Beckley: Not for us, no, but for the Environment Agency, absolutely.
Q37 Chair: Can I come back on that? The NAO says the compliance schemes are one of the Agency’s main preventative controls and that the compliance fees for obligated businesses are £210 less for those who are members of, for example, your scheme than for direct registrants. You are saying the EA is only getting £85 for each person—
Ruth Beckley: For the export accreditation.
Phil Conran: They also pay £2,500 for the export accreditation.
Ruth Beckley: Yes, for the initial accreditation, but not extra per site. The per-site additional fees the Agency receive are disproportionate for the UK compared to export, so they do not have the funding to enforce the export as they would for the UK.
For us, as a scheme, we pass on the fees from our members to the Environment Agency, and they are £210 less. That covers the fact we have already done the checks on the data they are submitting, making sure the PRNs are coming in and a statement of compliance is done. The agency do not have to do checks on each individual member; they just check the scheme as a whole.
Q38 Chair: I see. You have checked the paperwork but you are still relying on the Environment Agency to check the shipments and the containers?
Ruth Beckley: Yes. We do not have access to say to a reprocessor, “Can you show us where you are sending this material to? Can you show us your paper trail for that?” They will not give us that information. They are selling a PRN and we have the choice to buy or not buy that PRN at a given price. We do not have any other powers in terms of getting any other information from them.
Q39 Mr Goodwill: Do you feel those fee reductions are justifiable for those in the scheme? Obviously it is designed to encourage them to join a scheme.
Ruth Beckley: Yes.
Q40 Mr Goodwill: There is a reduction of about £1 million a year in fees because of that. Do you feel that system is justifiable?
Ruth Beckley: Yes, we do. In terms of the checking that we do as a compliance scheme on that data, which the agency then do not have to carry out on individual producers, we think that is very proportionate. Under the waste electricals regime and the batteries regime all producers have to go via schemes because it is more efficient for the agency to regulate in that way, rather than having individual registrants.
Q41 Mr Goodwill: Turning to Mr Marshall, obviously local authorities have a lot of pressures upon them and they are being pulled in different directions. One thing we have heard is that, aside from packaging, they are being encouraged to recycle a lot of garden waste because it is heavy and it meets the targets, when many people would be better off doing that in their own garden. The other issue to do with waste packaging is that many local authorities have switched to combined waste to increase their recycling figures, which means that they are getting a much lower-value product in the recycling facilities, although they are able to separate that to an extent. Do you think more could be done to try to go back to separated waste to make the recycling process easier, or are we stuck with comingled waste that we then have to put into a plant to separate?
Lee Marshall: There is a slight misnomer about the fact that kerbside sort is good and comingled is bad, as it were. Both systems can produce quality material, and there are probably examples of both sets of systems producing not so much quality material. It is a bit of a trade-off. With kerbside sort you may get generally what may be perceived as cleaner material, but you may get less of it, whereas with the comingled you may get more of it, but it may contain non-targeted materials as much as contamination. The non-targeted materials will vary depending on how the market is. It could be that for a particular grade of plastic, the market drops out; previously a MRF could have sorted that and it was economically viable for them to sort it and find a market. If the market decreases they may not find that.
It is also about what works for the public. Generally speaking it is easier for an individual to put all their recycling in one container than it is for them to take the time to sort it into three or four different containers. Because I am a waste geek—enough said—I have photographed my kerbside boxes at home. I have three different boxes for the materials, but within those three boxes are 20 different streams of material. So even a kerbside sort need further mechanical, optical and manual sorting down the line. It may be slightly better in the box, but you may get less of it.
Linking in to your first question about the contamination levels, the 0.5% contamination level you may be getting from other countries is probably because it is linked to deposit return schemes rather than kerbside material, so you are not comparing like with like. If you compared those countries’ kerbside material contamination levels, you would probably find they were similar to the UK’s, because they will be using similar infrastructure and similar mechanisms in their sorting plants.
Q42 Mr Goodwill: Thank you. Finally, turning to Mr Conran, the Environment Agency has asked you to look into materials that present the greatest risk of fraud. What has your work found so far?
Phil Conran: We have produced a risk matrix. We put some recommendations into the Environment Agency on how identifying companies that operate within that risk matrix could be made easier. One of the problems you have at the moment is that when a company exports plastic, all they have to report is that they have exported plastic. They do not have to report whether it is plastic bottles, plastic film or any of the high or low-risk materials. What we have recommended is that there should be much tighter reporting, by exporters particularly, and of plastic in particular, so that the agency can identify which exporters are exporting what material and then consider a risk matrix in terms of the countries that it is going to and the types of material, to then determine who should have the greatest focus. That is work ongoing.
We have literally in the last couple of weeks been working with the agency on taking that forward, and I am hoping that certainly in time for next year we will have a change in the system that will give greater transparency to the agency as to where those risks lie.
Q43 Chair: Does membership of a compliance scheme reduce risk in your matrix?
Phil Conran: That is to do with producers and producer registration. We are simply looking at reprocessor and exporter risk—exporter risk in particular—in the risk matrix. This is looking at who is exporting what to where, to try to identify where material might be being illegally exported, or where it might be exaggerated in terms of the PRN claim. It has nothing to do with what the compliance schemes are doing, which is all about managing the producer side of data and ensuring that producers are supplying correct data according to the accuracy requirements of the regulations.
Q44 Chair: What countries are high on your risk matrix?
Phil Conran: Certainly some of the far-eastern countries have been, but it is a very volatile situation. Poland at the moment happens to be one that is of concern. Turkey has risen up the ranks of countries that are receiving export material. Holland is one of the larger receivers of exported plastic at the moment, and I think there are concerns over whether that is being passed on to other countries or being reprocessed there. Different countries at different times have different risks related to their own internal controls and the types of material that are going to them.
Some of the countries now have very strong customs and excise controls on the entry of the material into ports, and a lot more is being rejected by some of those countries. They are less of a risk in terms of stuff getting through the system, but they are more of a risk in terms of the fact that stuff is still being exported there. It is very variable.
Q45 Joan Ryan: Do you consider the recycling obligation system to be robust enough to deliver the 70% packaging recycling target in 2030? That question is to whoever thinks they can go first.
Richard Kirkman: I am happy to jump in there and say: not on its own. There are a number of other measures that need to happen around it for us to achieve 70% recycling. The packaging system lightweights packaging and reduces it. It does not determine whether it is recyclable or not. We do think that a tax on non-recyclable packaging will influence designers to make the packaging they do use more recyclable. Along with that, a deposit return scheme will increase our ability to collect materials. We currently get about 60% of plastic bottles back in to the system. Countries that have a deposit return scheme get 98% of bottles back. With a deposit return scheme, a packaging regulation and the tax on single-use plastics, those measures together can get us to 70%.
Phil Conran: The other problem we have at the moment—we talked about it earlier—is that it is very much an annual free-market system without having the necessary encouragement to invest in future infrastructure. The feeling is that we have probably reached about the limit of what that free-market system can deliver on its own.
Ruth Beckley: We think that to look at the next level of materials, and the more difficult-to-recycle materials—absolutely, as you said, there could be some kind of disincentive around the non-recyclable, but you could also potentially split down the categories further. You could have targets around plastic polymer recycling levels rather than an overall plastic recycling target, for example, and that would then incentivise markets for things like the pots, tubs and trays that currently are more difficult. We think more will be needed, and we do not think the current system will hit 70%.
Q46 Joan Ryan: Will there be a willingness to do the more that is needed? I just note that we meet the EU recycling targets every year, but if you look at UK packaging recycling rates, we are below the EU average.
Ruth Beckley: That is for the top performing countries. With the EU overall, we are well within the mix in terms of our performance. The system does need reform to target the next level. In terms of hitting current targets, it does a great job, but as those targets get more challenging—and hitting higher percentages means you need more consumers to contribute to do the recycling, you need less contamination, and you need better processing to get those recycling levels at the end point—changes will be required. That will mean focusing on particular streams of product rather than plastic, for example, as an overall component. We think there could be some form of split reporting, as Phil mentioned for the exports, for the re-processing. Similarly, there could be split reporting for the producers so those targets could be put on them to say, “You now need to break down your products more clearly so that we can target those problem materials.”
Lee Marshall: It is a reflection of what Phil mentioned earlier about the short-term element of the market-based system we have in the UK. It is designed to meet the targets; it is not designed to exceed them or maximise recycling, like the systems in some of the other countries are. It cannot do it on its own; it needs to be, hopefully, part of a considered sweep within resource and waste strategy. For example, with DRS, virtually every other country that has implemented it did so before kerbside schemes were in place. If we did full-scale DRS in the UK, there is a chance it would just cannibalise the kerbside schemes. There is evidence of that in, I think, New South Wales, which is one of the few places where they have implemented DRS on top of kerbside. If you just look at it and say that DRS is the way to go, it is not fully joined up, and you will end up almost double-counting material that you have already recycled. Yes, it will probably increase it to a certain extent, but the cost to producers could be quite expensive, relatively, and it could impact on local authority budgets.
There needs to be a reform of the packaging system, but in conjunction with other things. At the moment, the packaging targets and the household waste targets do not complement each other. They sit alongside each other, but they do not pull each other along. There needs to be a more joined-up, holistic strategy.
Phil Conran: Our packaging recycling rate is based on what people report into the system, and not all recycling is reported. You do not have to report into the system. For instance, last year there was a major exporter of paper packaging who was not registered under the packaging system and who exported about the equivalent of 250,000 tonnes’ worth of PRNs. What we also need is a better system to capture all recycling that is carried out in this country and make it a mandatory requirement for people to register.
Q47 Joan Ryan: You would agree, then, with the National Audit Office report? It does not consider the Government’s estimates of recycling rates to be sufficiently robust. I do not think they say there is more going on; they are saying there is less.
Phil Conran: The accusation is made that there is less going on because of the amount that is exported, where effectively we are losing this level with contamination even though we are claiming it is being recycled. There is certainly some of that. Yes, some of it is exaggerated, but I think we also have to recognise that there are certain materials, especially when the price of PRNs is very low, where people simply do not bother to get accredited for PRNs because of the cost and the administrative burden, and where we are, therefore, not capturing that data. It is not all one way; it goes both ways.
Q48 Joan Ryan: There are significant weaknesses?
Phil Conran: There are significant weaknesses.
Q49 John McNally: Following on from what Joan and Robert have said, to improve a system or to make it simpler and easier to understand, you obviously have to understand the system. By the way, I thank our Clerks for providing this briefing. I want to come back to local authorities. We spoke about benefit structures earlier on in this Committee. Do you think there could be a colour-coding system that would match the recycling bins to their products? As you expressed earlier, there seems to be a lot of confusion at the moment—there often seems to be unending confusion in households about what goes where.
Could we look at something like a bin that had a red dot, a green dot or whatever, to help to improve recycling? If we could do that, how difficult would it be to harmonise across the whole of the UK? I know that you go some places and it is a green bin and a red bin. We have spoken about how even in this Parliament, you do not really know where certain objects go.
Lee Marshall: You could do, and it probably would be a helpful step forward, but it would not solve all the problems. On a basic level, it would not be that difficult to do. The colours probably already exist in terms of the colours that WRAP use with their “Recycle Now” promotions, and what have you. For example, when I was in a local authority in Wales, we used those colours for our boxes because we thought it fitted in with the comms that were already there. There is an issue. It will take time, or money, or both, to do that across the country, because—
Q50 John McNally: Which people are you talking about?
Lee Marshall: Sorry?
John McNally: When you say “people”, who do you mean?
Lee Marshall: Residents—individuals.
Q51 John McNally: Is that not part of the problem? What you really need is a nudge that takes the thinking out of this. I have spoken with Coca Cola. We visited a power plant earlier on in the year, and they said the same thing; there is a lot of confusion about what goes in.
Lee Marshall: The confusion is not with the system, as such, because most people will be able to tell you what they can recycle in their area the majority of the time. The confusion comes with not understanding why that is different for somebody else in a different area. They do not understand our world, as it were, and we have not been able to get across properly what facilities can take what products.
There is also an element of people wanting to do the right thing but doing the wrong thing. Even though you are telling people and individual householders, “We only want those sorts of plastics,” there is an element sometimes of people saying, “I feel as though I should be putting that in there and I want to, even though I cannot.” They do not appreciate the consequences that causes, in terms of non-targeted and what have you. Standard colours would help in a small way. You could do it. It is not that difficult in the scheme of things, but it would either take quite a long time to do or a lot of money to do quickly because of the sheer amount of bins and containers that are out there. Yes, there is the potential for it.
Q52 John McNally: The Chinese say the best time to plant a tree was 25 years ago, and if you did not do it then, the best time is now. You have to start somewhere.
Lee Marshall: You have to start somewhere, even if you appreciate that it is going to take 10 years, but there needs to be a commitment to make that start. Again, where is the funding going to come from to change all these bins over if they have not come to the end of their natural life?
Q53 Joan Ryan: Can I put a question to Ruth? The NAO’s report notes that coffee cups fall under the paper category. The paper-recycling obligation is 69.5%, but less than 1% of coffee cups are recycled. Does this demonstrate a failing of the compliance system?
Ruth Beckley: The categories in the system are those defined in the European packaging directive, other than metals, where we split them out into steel and aluminium. You can meet the paper obligation by recycling any kind of paper or card. It is an overall requirement and it does not target specific materials. The system has never been asked to do that. It meets its requirement as an overall paper target.
There is the option to put in place specific targets within that. For example, the European Directive requires metals to hit a certain rate, whereas we have split out steel and aluminium within the UK regulations. We have also implemented in the UK regulations a glass re-melt requirement. A minimum amount of glass recycling has to come from re-melt rather than from aggregate. There is the potential to put in place other specific targets on specific streams of materials, or plastic polymers, or glass colour, or paper format, for example. That just has not been put in place in the system currently; therefore, there are not specific recycling targets for specific components.
Q54 Joan Ryan: Are you saying it is just because it is not put in place? I wondered whether it was the complexity of recycling this kind of mixed-material product that meant that less than 1% is genuinely recycled.
Ruth Beckley: Coffee cups particularly are difficult because they have two components. Again, the directive requires that any product that has multiple materials falls into the category where the weight is predominant, so coffee cups fall under paper. There is no difficult-to-recycle category, but we feel that some sort of disincentive around difficult-to-recycle materials would be beneficial, because that would either provide extra funding to deal with those problem materials or stop people using them because it does not work commercially for them to do so. We think that could be part of future reform of the system, and we would like to see something around that recyclability element. We think that is important.
Phil Conran: The packaging system is designed to get the cheapest material out of the system to recycle to get the PRNs. Some 4.4 million tonnes of paper packaging are put on to the market, and 3.8 million tonnes are collected for recycling. There is a total of 50,000 tonnes of paper cups put into the market, so it is a miniscule amount. Its collection will have very little impact on meeting the targets under the packaging regulations.
Richard Kirkman: On coffee cups, one of the difficulties is getting them. When it comes to things in in the household, you are in the home, you have the packaging and you put it in the bin. With coffee cups, you get them from the coffee shop, you go out into the world and you end up somewhere with the cup, so they are everywhere. The problem is more the difficulty of capturing them, rather than the value of the material.
Ruth Beckley: Yes, on-the-go recycling is a known issue, because there is a lot of target on households.
Q55 Geraint Davies: In the light of what is being said, would people favour a differentiated plastics tax that was basically “more tax if it is more difficult to recycle”, with a view to getting purer recyclate, for the reasons you have just given about coffee cups, as opposed to this PRN system which is clearly not working and is out of date? What do you think, Ruth Beckley?
Ruth Beckley: In terms of a tax, if producers are paying more for putting something difficult on to the market, we would like to see that money go towards solving that problem rather than necessarily just going into the Treasury.
Q56 Geraint Davies: Yes, of course. The idea would be to target tax at materials, as you said, to encourage manufacturers towards recyclable material and away from hybrid material, to make it more profitable to recycle. Is that something that people would favour?
Phil Conran: That is broadly what will come in under the new requirements of the circular economy package and the revised packaging regulations. A modulated fee will be applied. That modulated fee could be calculated on the basis of recyclability and potentially recycled content, if you wanted to. You could achieve the same within the packaging regulations through the modulated fee system without having a tax, which then disappeared into the Treasury. Much as I am sure they would value it, it would not necessarily help recycling.
Q57 Geraint Davies: But it could be hypothecated in the same way, could it not? Do you have a view, Mr Kirkman?
Phil Conran: I have yet to see the Treasury do that.
Richard Kirkman: We think that the PRN system works, except for the anomaly with export and the fact that targets are not continuing to go up. While there are a lot of issues with it, which you have raised very vividly in your report, we do think it is very simple and you can see that it works. That is why the landfill tax worked, because it was enormously simple. There are problems with landfill tax. There is fraud committed on landfill tax. It does not mean it was not extremely effective. I do not think everyone agrees with me, but we think the PRN system works very well; it is just that the export anomaly should not be there and the targets should increase every year. That will drive new facilities to be built. We will build them. We have a PET plant in east London that we do not run because there is not enough PET to run it.
Q58 Chair: You are critical of the Government for freezing the targets on certain materials for the last couple of years?
Richard Kirkman: I am not critical of the Government, I just think it is a fact that if you do not increase the targets—
Q59 Chair: You have just said they need to rise; therefore, if they have not risen it is a problem, is it not?
Richard Kirkman: I am not critical of the Government. I just say it is a fact that they have not gone up; therefore, the PRN value will not go up. That is just a fact of how the system works.
Ruth Beckley: The future visibility of the targets is really important for investment.
Phil Conran: To finish on the single-use tax or non-recyclable tax, we do think that that is very important. That is a different mechanism that will influence designers to design packaging better, and that money should go to local authorities so they can change their collection systems.
Q60 Geraint Davies: Mr Marshall, what do you think about a differentiated tax?
Lee Marshall: Whether it is a tax or whether it is modulated fees, there could be financial instruments that incentivise producers of packaging to look at how they design packaging and how they make it more recyclable. It is about answering questions. Up to now and generally speaking, packaging technology people have been given the question to answer, “Protect the product as best you can”, and they have been really good at doing that. What they have not necessarily been asked is, “And make it easily recyclable at the end.”
It is a bit like with the PRN system. If you ask the question, “Has it meant the UK has met its targets?” then yes, it works. If you ask the questions, “Has it invested in the collection infrastructure? Has it invested in the treatment infrastructure?” then the answer is no, it has not worked. It depends what question you are asking as to what answer you then give. Definitely some sort of financial system that would help to make things more recyclable would be an advantage, whether it is a tax or the fees.
Q61 Geraint Davies: Moving on, can I ask what estimates you have had of the total amount of free-riding companies in the current PRN system?
Phil Conran: It is extremely difficult to estimate. We have had approximately 7,000 companies registering each year for the last few years. It has not gone up. Nevertheless, a lot of companies have dropped out as they have gone bust and other ones have replaced them. New companies come into the system each year. There are certainly a lot of unintentional free riders, and a lot of companies do not understand about the regulations. They are not even aware of them. Companies like restaurants, for instance, which are often well over the threshold, simply have no idea that these regulations exist.
In terms of free riders, I think there are a lot of small companies free riding because they do not understand it. I do not think there is a huge amount of deliberate abuse of the system and a lot of companies deliberately avoiding it. The enforcement undertaking system does encourage people to come forward, although I do not think it is used as effectively as it could be. That allows companies that have not registered previously to register without getting prosecuted, and that could be handled better. I do not believe there is a vast amount of free riding, but there will always be companies out there that do not know about the regulations, and each year we will see new companies coming up.
Q62 Geraint Davies: There has been a suggestion that the Environment Agency perhaps does not have enough resource to enforce compliance, and that it in fact targets low-risk companies more than high-risk ones. What support should be provided, and what are the alarm bells for tipping off the Environment Agency on who is abusing the system?
Phil Conran: There is a concern. The ACP did a survey of various obligated parties a couple of years ago, and free riders were certainly one of their main concerns, because the view was that it was not being tackled effectively. Companies were being reported to the Environment Agency and it was not necessarily being followed up. I think that is highlighted in the NAO report.
Yes, I think that is something the agency is aware of. They have now recruited somebody specifically to look at free riders, and I think they are doing much more desktop work on that. Again, I am not sure there is quite enough joined-up thinking within the Environment Agency in getting other parts of the Environment Agency—they tend to work in silos in terms of enforcement, and perhaps more could be done a bit more scientifically. I do not think it is a vast problem.
Geraint Davies: There are no other particular comments about Environment Agency compliance capabilities or strategies, are there? No. Okay. Thank you.
Q63 Chair: Ms Beckley, the NAO’s report mentions that the Environment Agency relies on compliance schemes for tip-offs. What rings your risk alarm bells?
Ruth Beckley: We do a lot of work to look at the free riders, because they are basically scheme members to us. We try to recruit them into our scheme and get them compliant with the regulations. As Phil said, the enforcement undertakings really help with that. For us particularly, we look for other companies telling us they do not think their competitors are necessarily complying. We also look at where new products on to the market have been particularly popular, so we think they are going to start going over the thresholds—fast-growing businesses, which you often see in the newspapers—and we will talk to them and try to target them.
The issue is that they do not know what we are talking about. They do not understand that these regulations exist. As Phil said, particularly for restaurant businesses—and online businesses, as well—they are so busy growing quickly they have not really got their heads around these wider regulations. I think the awareness side of things is definitely lacking, and we would like to see more around that.
We think that the Environment Agency’s focus on it has not been as great recently, so it is hard for us to say to someone, “You should be doing this. Yes, you need to pay for all the years you have missed, but this is the right thing to do,” and for them to take us seriously, if there is not necessarily a push on that from the agency as well. We are pleased to see they have someone to work on that, but we will continue to work on it ourselves to try to bring more people into the scheme so that the costs are distributed as fairly as possible.
Chair: Thank you all very much indeed for your comments today. They have been very helpful.
Examination of Witnesses
Witnesses: Dr Thérèse Coffey, Chris Preston and Marie Fallon.
Q64 Chair: We come to the second part of our session in the Committee’s inquiry into the NAO’s report on the PRN obligations and the Government’s proposals to reform them, which we hope we will see soon. For the purposes of Hansard, could our witnesses today introduce themselves from my left, please?
Chris Preston: I am Chris Preston. I am the Deputy Director for Waste and Recycling.
Dr Thérèse Coffey: I am Thérèse Coffey, Minister for the Environment.
Marie Fallon: I am Marie Fallon, Director of Regulated Industry at the Environment Agency.
Q65 Chair: Thank you all very much indeed for being here, and a particularly warm welcome back to the Minister. This NAO report had some shocking things in it, and one of the conclusions is that DEFRA does not know what value the system has added, or whether the Environment Agency’s approach to tackling fraud and error is proportionate. Why has DEFRA not reviewed the system before now to assess how it was working?
Dr Thérèse Coffey: The regulations have been amended several times since they were introduced in the ’90s, and there has been some reviewing of the function of the regulations. There have been a series of amendments, I think in 2003, 2005, 2007, 2008 and 2010 and then a couple of years ago. I think it is fair to say that when the most recent consideration of the review was done in 2011, it was felt that any further policy decision changes should wait until the EU directive changed. That said, we now have a post-implementation review. That was a measure brought in by the coalition Government which means that we have to, every five years or so, undertake that review, that is the process that we have been doing. The Committee will be aware that we do have this comprehensive review under way as part of our future resources and waste strategy, which we intend to publish later this year.
Q66 Chair: We have just heard from our previous panel, who refused to criticise you but I am not going to be quite so shy. There was a criticism, if I can paraphrase it, that the recycling targets have not been increased for the past couple of years. Is that a matter of regret for you, Minister?
Dr Thérèse Coffey: I think we are considerably ahead of all the EU requirements on the recycling targets by material and I think—
Q67 Chair: So just rest on our laurels?
Dr Thérèse Coffey: —and from what I am aware there have been things there—do you want to add more, Chris?
Chris Preston: Can I add two things? The first is in terms of review of the system. A new strategy for packaging waste was produced in 2009. That reviewed the then Government’s policy, which included the producer responsibility obligations as well. The then Government set out a future set of strategies. The coalition Government did a review of waste management policy, which would have included the packaging waste obligations. The coalition also did a waste prevention programme for England, which set out a review of what had been achieved but also a forward-looking review. That will be reviewed again in 2019. I think it would probably be an unfair characterisation to say that no review of the regulations has taken place. I think there have been several reviews throughout different Governments.
Q68 Chair: They have focused on operations though, haven’t they? There is no strategy or vision. Isn’t that the problem?
Chris Preston: Say that again, sorry?
Chair: They have focused on operational issues rather than the strategy. What is the strategy?
Dr Thérèse Coffey: The strategy has been quite clear. We have had a market-based strong review. That was the basis of the systems in 1997. It served us pretty well, but there is a recognition that at various different levels, some recycling has plateaued and some of it continues to increase. Now is the opportunity, especially as we are leaving the European Union, to consider future ways to potentially accelerate or refine some of our systems.
Q69 Chair: One of the criticisms from the NAO is that the Department was not able to demonstrate what actions were taken following recommendations from Eunomia in 2015. What were those recommendations and why were they not acted upon?
Dr Thérèse Coffey: That was commissioned by the Department before I was in post, to look at various issues and to inform policy making. They did not have specific recommendations, as such, but there were findings that we have included and incorporated in our consideration of policy development. I think Chris is closer to the detail on that, but it is an input into what has been helping our thinking.
Chris Preston: That is exactly right. Our economists commissioned the work to help them design the economics and the impact assessments to help policy teams design the forward-looking policy, bearing in mind that at that point in time the circular economy package was about to be launched by the European Commission, so we wanted to be in a good place to be able to understand what had happened with the policy in the past, and to respond to the kinds of things that we thought might come out of that set of negotiations and the amendments to those directives.
Q70 Chair: The quality has declined, hasn’t it? You said back in 2013—or your predecessor; I am not sure how long you have been there—that improving quality would be the way to future-proof the sector, and yet quality from English MRFs has declined since 2014.
Dr Thérèse Coffey: I know that we asked for a bit more detail, and I think we have had some from the Clerks, on what led you to that conclusion. I think we have received that information. We need to be careful about what we consider to be the different levels of contamination. That does need to be appreciated when we are looking at waste, but sometimes it is just non-target material. So you have plastics of different polymer types, they are being used. They get contaminated with excessive food residues, and you are just not going to end up taking the effort, frankly, to try to scrape off somebody’s tikka masala that is now basically cremated into the plastic in order to try to get it there. So there are differing levels, I suppose, on attitudes that are taken on that, but it has not been a case of any significant change.
Chris Preston: Overall, the general contamination rate is an average, bearing in mind what the NAO is talking about in here. Overall, though, it is quite a wide spread in terms of how different MRFs operate, so you will literally get some MRFs that are operating at 100% target material at the other end, but you only need a few that are still performing quite poorly and that will bring the overall average down. There are ranges, but I think the mid-range is something like—we can correct these figures—89% to 92% or 93%. There is a significant chunk that are performing quite highly, and then, as the Minister rightly points out, some of that is non-target, non-recyclable material, so some of that material can be separated, sorted and recycled.
Q71 Chair: But that is the stuff that is being exported at 100% export value, and classified as being fully recyclable. Isn’t the problem that we have this contamination. The data shows that the contamination rate is 9.5% for plastic and 8.2% for glass in 2017. That is getting worse over the last three years, not better.
Dr Thérèse Coffey: Exporters are required to submit a sampling inspection plan on the kinds of samples on which they will issue evidence. Because this is more of an inspection thing, I wonder if Marie might want to add a bit to that.
Q72 Chair: We are going to come on to inspections. We have quite a lot on inspections and contamination, as a separate thing. I am trying to get to the strategic overview. When you sit at your desk, Minister, and you see that there is more contamination now than there was four years ago, surely that is a sign that things are going backwards, not forwards?
Dr Thérèse Coffey: Okay, let us get into that level. Yes, I think the very fact that we are seeing councils go backwards, with their household recycling rates collapsing, is a real problem. We have seen Newham go backwards significantly badly, with less than 15% recycled. There is a lot of education that continues to need to be done, particularly in households.
Q73 Chair: You cannot just play pass the parcel with local councils, can you? Newham has had its budget cut by about 50%. It would be miraculous if councils were increasing this at a time when they are cutting social services, older people’s services and schools. These are incredibly difficult times for local authorities.
Dr Thérèse Coffey: Let us not get into the numbers precisely, but it has certainly not been cut by 50%. I recognise that the rate support grant may well have been cut by that level, but that does not mean they have not had an increase in money from things like New Homes Bonus, business rates and similar. I do not think it is acceptable—
Q74 Chair: Central Government support overall has been cut by—
Dr Thérèse Coffey: Central Government also supplied, as I say, the extra business rates and the New Homes Bonus. I am not trying to suggest in any way that councils do not feel under financial pressure, but that does not remove the requirement to try to increase the amount of good recycling and reduced contamination that they are processing.
Q75 Chair: Minister, can you tell us when we are going to see the resources and waste strategy? We were promised it by the Secretary of State for September.
Dr Thérèse Coffey: It is still in its final stages of consideration within the Department, and it will be published before the end of the year. I think if we can get it out by the end of November, that would be a good outcome. It is a pretty comprehensive strategy and I think one that will be worth slightly waiting for.
Chair: It has been a very long gestation, but yes.
Q76 Kerry McCarthy: When the Chair says, “We were promised it in September” that was the latest promise that was made. It is something that we have been expecting for a long time, but I understood that it was all done and dusted and the reason it could not be published is that it has financial clauses in that would best be tied up with a November Budget. That is what I have been told. Is that not the case?
Dr Thérèse Coffey: It is not done and dusted. It is close.
Q77 Kerry McCarthy: Okay, but is the plan to release it around about the time of the November Budget because there are some fiscal measures attached?
Dr Thérèse Coffey: I think there are some fiscal measures in there, and the Budget is used to announce fiscal measures. I think it is fair to say it is still not finished. It is pretty comprehensive, and we need to make sure that we have it right, and right across Government as well.
Q78 Kerry McCarthy: In last year’s Budget the Chancellor announced a consultation on taxes on plastic and then he re-announced it in spring, and there have been some rumours around 10p on plastic bags and bits and pieces. Is that going to be tied up with the strategy? It seems like that is a separate endeavour at the moment.
Dr Thérèse Coffey: I think the strategy is a comprehensive approach. What is fair to say is that there are a number of different, smaller items that are just activities to try to help shift the dial on certain things. The call for evidence on single-use plastics was held by Treasury. They have been analysing that. DEFRA Ministers and officials have collaborated on a number of activities, but I cannot say any further on behalf of the Treasury.
Q79 Kerry McCarthy: It does not make sense to do it separately, does it? The strategy ought to have everything in there. If you have spent so long preparing the strategy, I do not really see what benefit is served by having a little sideline.
Dr Thérèse Coffey: Just because some things may have been announced earlier or activities taken, that does not mean they are not part of the strategy. Other stuff that is in the strategy in itself will still take time to deliver in the future, but it is the direction in which we are going. I cannot say any more about the strategy because we need to publish it.
Q80 Kerry McCarthy: It sounds a little bit, from what you have just said, as though the Chancellor wants something to announce in his Budget so you are saving this.
Dr Thérèse Coffey: It is just the practice of Government that fiscal measures get announced by the Treasury in Budget. That is just how our processes work.
Chair: There is nothing wrong with a bit of inter-ministerial competition on environmental initiatives, so as long as the right hand and the left hand know what they are doing and they are working in harmony together, which I am sure they are. We are going to move on to some questions from Anna.
Q81 Anna McMorrin: I want to delve a little bit more into co-operation between yourselves and the Treasury. The consultation revealed that industry has quite a lot of concerns about coherence between taxes on plastic and also PRN reform. Can you go into a little bit more detail now and tell me how you are going to ensure that the outcome of that consultation and the reformed PRN system that you want to see are complementary?
Dr Thérèse Coffey: We are never going to get rid of plastic, and packaging is more than just about plastic. The whole concept of PRN that we have considered and floated previously is very much about the polluter pays principle, and about making sure that more effort is put into proactively managing waste in a circular economy way, as far as possible. If you consider things like taxes on some of these plastics, there is also an element of trying to shift the dial away from the use of those materials at all, and to have substitutes in the first place. There are some times when it will not be possible to substitute for plastic in packaging, but there are plenty of good examples where it is. If there is stuff that you can drive to make that change, whether it is straws—there are still some parties in Westminster and the surrounding area that unfortunately still have plastic straws. As some of you know, I am now known as the straw-snatcher, in terms of trying to discourage their use. I will not disclose the parties. We have been out together, Mary. Nevertheless the two are not entirely trying to achieve the same outcome, but nor are they mutually exclusive.
Q82 Anna McMorrin: If the Treasury introduced a tax or a PRN fee structure change—I presume you are working closely together with the Treasury on that reform, and raising fees on that hard-to-recycle packaging—will those higher costs trickle down to consumers? Do you believe that we are going to see a change in how that affects the end consumer?
Dr Thérèse Coffey: That does not need to be the case, no.
Q83 Anna McMorrin: Can you expand on that?
Dr Thérèse Coffey: I think it will depend on how companies respond to the new scheme. I am very conscious you have your private Member’s Bill, and we are due to meet in October to talk about that. I think that, as I say, the tax is almost a very quick way of trying to move the behaviour of both manufacturers and, potentially, consumers on how they use single-use plastics, in a different way from how a quite significant reform of the PRN system will require manufacturers and processors to consider the composition of how they sell products to consumers. We cannot really say much more because some of this stuff is still to be finalised, quite candidly, and it needs to come out with the resources and waste strategy.
Chris Preston: People respond to price changes. If people can make choices in the types of product that they buy and the packaging that surrounds that, I think you will find in some cases that prices might increase for more expensive packaging, depending on how the system works. So consumers are given the choice, and if they choose to buy something that is a harder-to-recycle material then obviously, as the Minister says, part of the polluter pays principle is that that is paid for in the price of the goods that they buy.
Q84 Anna McMorrin: How does that work if the consumers are paying the higher cost?
Chris Preston: Because consumers can make a choice. So they can make a choice about the kind of packaging and what they buy.
Q85 Anna McMorrin: It is whether that choice is there.
Chris Preston: In terms of alternative types of packaging, yes. Again, that is why the Minister is right that you have to have a comprehensive strategy around all of these things. If you take the packaging regulations, which is partly what this hearing is born out of, that is only one part of the picture. There are other bits of policy that contribute towards delivering reduced packaging and better recycling, and it is quite a complex picture. I think that is one of the things in terms of our strategy where we want to see a whole picture approach, as opposed to focusing on individual things.
Q86 Anna McMorrin: And effecting change, rather than looking at the—
Dr Thérèse Coffey: There will certainly be change. It may not happen overnight, but it will change.
Q87 Anna McMorrin: It would be good to hear some of that ambition articulated a little bit more clearly. How effective do you think the packaging essential requirements have been in minimising packaging? Can you provide examples or measures of their success?
Dr Thérèse Coffey: The enforcement of these regulations is undertaken by trading standards, and you will all know from your local areas quite how trading standards may wish to prioritise different elements.
Q88 Chair: And how many officers are going to be left after the cuts?
Dr Thérèse Coffey: In essence, the regulations are supposed to be a market harmonisation provision. That is the point of them—to allow minimum standards to make it more straightforward to access different markets. That is the intention of them. There are provisions within the legislation to try to minimise packaging, but a lot of it is, as I say, about trying to make it as straightforward as possible for a producer of a good in Cardiff to be able to sell it in Krakow and in a consistent way. It is recognised that it is not straightforward or even possible, really, to separate the impact of those regulations from all the different ones, but the main expectation of what the regulations were due to bring was not necessarily about environmental impact. It was more about consistency.
Chris Preston: I was going to add to what the Minister said. There are examples where producers of packaging have changed to use, say, lighter glass. I met with the wine industry recently. They import wine in tanks and then fill it here using thinner packaging, so that it does not shatter when it is being transported. So there are examples. There is a commitment in the current regulations to review them by 2020 as well, so there will be a post-implementation review of how the regulations have operated. They were BIS, as was, regulations and they transferred as part of the machinery of Government change into DEFRA in 2016, bringing all that into a more coherent way of working and bringing all of the producer responsibility regulations and regimes into DEFRA.
Q89 Anna McMorrin: I want to try to get to the bottom of how you want to fund the collection, recycling and clean-up of that waste. At the moment, that falls to consumers and local authorities, and taxpayers fund 90% of it. How do you see a reformed system where the polluter pays and the polluter then is responsible?
Dr Thérèse Coffey: I expect the outcome of these changes to allow greater opportunities for councils to improve their recycling and their collection. It is difficult to go into too much detail without getting into the depths of the resources and waste strategy on other issues, but it is very clearly the intention that it will be more straightforward for councils to be able to do that recycling.
We are consistent in our approach; unlike most other EU nations, we have comprehensive kerbside recycling that has been in place for a long time. There has always been a borne cost, whether by the consumer paying in their pricing, potentially, or by the consumer paying their council tax or central taxation. That is always the outcome. I think the benefit of what we are trying to do through PRN reforms is that it will also stimulate the secondary market, which will help councils in the consideration of what they do with the waste. That should, in itself, help councils that want to take advantage of that. At the moment they sell their waste. Some of it gets reprocessed in the UK, and some of it they export to people from abroad who want to buy it. We believe that our changes will stimulate the secondary market, which at the moment only really works for PET.
Q90 Chair: I am interested in what you have just said. Are you saying that you are going to try to allow councils to cut out the middle man, if you like—or the middle person, to use gender-neutral language—and go direct to the purchaser, to narrow the sales and purchasing chains between the people collecting the resources and the people buying it?
Dr Thérèse Coffey: I am not aware of any reason why they cannot do that themselves today, but most councils just do not choose to, because it is not their competence to get into the back and forth. Nevertheless, at the moment the only secondary market that is really working very well is in PET. The intended outcome of our policy is that the secondary market for more materials will become a lot more in a council’s interest to want to do that, and then it will be up to them to decide if they still use agent A to sort that out or if they want to get into it themselves. We are not in the plan of dictating how councils choose to take that next step forward.
Q91 Chair: Will there be more domestic reprocessing as a result of the resources and waste strategy?
Dr Thérèse Coffey: I am hopeful that there will. One of the reasons why councils, through their agents or whatever—the processors—export is because other people from around the world want to buy our waste. When stuff is being made for a variety of retailers in Vietnam or Malaysia and they need packaging, they are quite happy to buy our packaging that we have already used and it goes back. In some ways it is almost an international circular economy. I am optimistic that there would be an increase in domestic reprocessing as well.
Q92 Mr Philip Dunne: I am going to ask some questions about contamination but first, if I may, I will just follow up on what the Minister has been describing. We in this country recognise that there is quite a strong system of doorstep collection run by local authorities, which relies at the moment very heavily on the value of some of the streams of waste, in particular aluminium and secondly PET, as you touched on. The Government is about to consult on a deposit return scheme for drinks containers, which would potentially divert aluminium and plastic waste streams that have value to the local authorities into a DRS scheme. Can you give us your thoughts as to how that might work and reassure us that you are not intending to jeopardise the local authority doorstep scheme by the introduction of a DRS scheme?
Dr Thérèse Coffey: I think it is fair to say that in this policy development, we are very conscious that councils say that is one of their main sources of income when they are thinking about this. I think the wider impact of what we are doing with PRN may relieve some of the pressure on them to just be focused on PET, or largely focused on PET.
The intention of the DRS will be, first, to increase recycling, but also to reduce littering. It is a mixture of whether people do it on the go, and whether they save their bottles to do at their supermarket shop or to put in their kerbside recycling. The general outcome that we want to get is to make it as easy as possible for people to do the right thing for the environment with goods that they purchase.
Without going into a massive amount of detail—I do not think this bit is finally worked out anyway—you could imagine that a council pays back a household for bottles that they have picked up on their behalf. It could be, “Please donate this to us as your friendly council to help us keep down council charges” or, as we see in other countries, people may go on bottle drives. They go round door-to-door collecting bottles for money for Scouts, Guides, or whatever it is. You do see it get used in a slightly different way as an opportunity, where people see it as part of helping the environment as well as helping good causes. Not everybody necessarily sees their council as a good cause, but if they see this as an opportunity to add to council budgets, they may do.
Q93 Mr Philip Dunne: I understand that, but at the moment there is a cost to the council for the kerbside collection scheme, and in part that is recovered. I hear what you say about: if they were to collect the bottles, they would get a revenue from that under the DRS scheme. At the moment, however, they get significant revenue to help defray the cost from some of the product that they collect, and if it is diverted elsewhere they will not get that. That will put more pressure on the councils to deliver an effective scheme, and it runs the risk of reducing effectiveness of the kerbside scheme. That would be my concern, so I am pleased you are thinking about it.
I have one other point before we get into contamination. The Packaging Waste Directive published in April by the European Parliament was moving the calculation of recycling targets towards the weight of material that is recycled. At the moment, I believe it is calculated on material that is both recycled and recovered energy, and many continental countries are more advanced than we are at the recovery of energy from recycled material. When we look at the resources and waste strategy, are we moving to adopt that same approach so that we are focused on the recycling?
Dr Thérèse Coffey: I think it is probably best if Chris answers some of that in more detail. By the way, the Commission itself is very concerned about the explosion, if you like, of incineration around the European Union. It does not want to massively encourage it in the future. Some countries incinerate almost all of their waste, or they are reaching that very high level. I am not convinced that in respecting the waste hierarchy, we want to massively increase the amount of incineration that we are doing, but of course we want to reduce the landfill.
Q94 Mr Goodwill: That was a response to the landfill directive—the number of incinerators built and energy-from-waste plants. We did not respond in the same way in this country because of the difficulty of getting planning permission for incinerators, partly.
Dr Thérèse Coffey: I think, actually, there is sufficient capacity out there for incineration. Often what happens with policies is that they come out with unintended consequences. The general view I get from the Commission in the report they did is that we now have too much incineration across the European Union, and we need to do more to refocus on recycling. I think that is the sentiment there, but I think it is probably best if Chris goes into some of the detail about the directive.
Chris Preston: In all the directives, even the previous ones and even before the reformed version came out, there had always been a split between recovery and recycling, but there was always a greater emphasis on recycling. In the change in the new directive—in the circular economy package, as everybody talks about it—there is a greater emphasis on recycling more, which I think is fine. But there are always split targets as well. Even in the PRN system, you can have a recovery PRN, but the value of those is incredibly small because it does not encourage people to send things to energy-from-waste. So it has always been there, but yes, you are right; there is more of a focus on recycling rather than recovery.
Q95 Mr Philip Dunne: Will that be reflected in the resources and waste strategy?
Dr Thérèse Coffey: I think it is quite consistent with how we have taken this approach, anyway.
Q96 Mr Philip Dunne: Okay. On contamination, back in 2013 DEFRA recognised that there was some illegal contamination in exported recyclable plastic material going to countries with cheap labour costs. How did the Department address that issue?
Dr Thérèse Coffey: It would have been my predecessor; I am not quite sure who it was. Some of the regulations were amended in 2014, I think it was, and that required all MRFs to routinely sample and test the composition of their input and output materials, and they had to report that to the agency. It is reported quarterly by WRAP, and the latest trend suggests a small improvement for plastics and paper, a slight deterioration for glass and generally consistent for metals. Marie, did you want to say a bit more about the export?
Q97 Mr Philip Dunne: It was export in particular to countries exploiting child labour, which was part of the problem.
Dr Thérèse Coffey: Do you want to talk about the process on exports, Marie?
Marie Fallon: Yes. Obviously, when somebody exports, they have to have an accredited certificate, and we have to check that before we grant them a licence to export. Part of that would be checking whether the company complies with the regulations in the country that it is going to be exporting to. We do not always approve those. We do refuse a number of them, and I can give you details on that later, if you wish. There is a recognition over time that this has been an issue. We do our best to make sure that the company in the other country is accredited, in terms of its compliance. Obviously, the company that is sending the waste has a duty of care themselves to make sure that the waste is properly dealt with, at the end of the day.
We work as well with agencies in this country, particularly around modern slavery. We co-operate with police and the regulator to see if we consider there are any risks, because we know that it is an industry that is exposed to that kind of labour, particularly in this country. We try to work together and work with international partners where we can, to see what we can do to reduce it.
Q98 Mr Philip Dunne: If you do have evidence, it would be very helpful if you could provide it to the Committee. The NAO were quite critical of the relative lack of enforcement, as they saw it, and in particular of the relative lack of evidence of you enforcing illegal contaminated product.
Marie Fallon: We know that a lot of waste that is exported on packaging is green list waste, so it is designated as low risk; that is why it is green list. We know that some operators do try to get round the regulations, and that is where we focus our efforts. We do not get charged income for that work, and we use our grant-in-aid work. We have had additional resources around grant-in-aid around waste crime, and we have been using that to focus our efforts on intelligence. We work very much internationally with international crime groups and so on, to see what we can do to work together.
I know the NAO report focuses very much on inspections at sites, but the waste industry is much more sophisticated than that and criminals are much more sophisticated than that. So we have done a lot more work on our intelligence gathering and focusing our efforts. An example is some of the work we have done at the ports. In 2013 we inspected 167 containers, and it is quite an expensive job to inspect them so we do not do it lightly, and we do that based on intelligence. In 2018 there were 1,012 inspected. In 2013, of the ones we inspected, we returned 65, but this year we returned 367, so we have had a much higher hit rate in terms of bringing them back and getting them repatriated. That is because we use our intelligence and we work with the shipping lines, the border force and so on to do that much more intelligence-based, focused effort. We are putting in more resources, because we can see from our evidence that that is much more successful. That is why we are doing a lot more intelligence gathering and focusing our efforts rather than just doing site visits, which is a very traditional way of doing inspections.
Q99 Mr Philip Dunne: That is helpful, because I think most of the NAO evidence was based on site inspections rather than containers. Can you put the container figure in context? Can you give us a scale of the number of containers?
Marie Fallon: I do not have that to hand, but I can certainly provide the Committee with the number of containers. It is a lot. As I say, traditionally, if you think of years gone by, I know a lot of people talk about our officers being inspectors going out on site, but we are much more sophisticated than that, whether it is buying on the internet—we are doing a lot of work around vehicle parts with eBay at the moment—or using technology. Last time I was here I talked about tracking devices on waste to see where it goes. We are trying work much more upstream, which is not necessarily something you can show. We have about 6,000 activities that we do across packaging to try to impact on our compliance. As I say, we accept the criticism in the report that our site inspections are not at the level that we anticipated, but a lot of our effort is very much on that upstream early intervention.
Q100 Mr Philip Dunne: Could you drop us a line afterwards to set that out? I think what you have just described did not come through in the NAO report, and I think it would be helpful to see the relative importance you attach to discreet activity compared to site inspection. We are not asking you to reveal secrets that would be helpful to people that you are trying to apprehend, but whatever you can give would be very helpful in terms of scale.
Could I follow that up by asking you for your view as to whether the PRN system incentivises export tackling fraud contamination more or less as a priority? Is the UK offshoring less contaminated waste than it has done, as a result of some of the recipient countries turning it away?
Marie Fallon: At the end of the day, the producers have a responsibility under their duty of care to make sure the waste is being properly managed. Waste is a commodity; we have seen the growth of waste as a commodity. When I came here last time, we talked about how within the waste industry there is a propensity to have more criminal activity than you would in normal commodities. I think because waste as a commodity has increased and it has become more sophisticated, there are more opportunities for people to try to get round the system. That is why we employ different techniques now to try to get ahead of the game.
Q101 Mr Philip Dunne: The NAO have taken the view that DEFRA’s estimates of recycling rates are not as robust as they can be, and perhaps not as robust as in other countries. Do you have evidence from other countries? Do you look to others to learn best practice?
Chris Preston: I might have missed it, but I do not think they compared us to other countries. They raised a number of issues around how we calculate our figures. They suggested in terms of our recycling rate that we should make an estimate of how much of that might be attributable to fraud and error. I would argue that we do adjust our figures when fraud and error is detected. The Environment Agency manage the National Packaging Waste database where people record their recycling figures. That is rigorously checked, and figures are taken out. If people are found to have fraudulently shipped things abroad and/or claimed something fraudulently within the UK, figures are adjusted for that.
In terms of our data the NAO probably had a fair criticism that we should show a data range, so that is definitely something we can look at for the future. In terms of the robustness of our data, I would not necessarily agree with the NAO’s conclusion on that. If you take packaging, we reviewed the data on our placed on the market figures—the denominator bit of the recycling target—in 2013, 2014 and again in 2016, and every time we set a new target we consult on that. So it is an open consultation where people have the opportunity to challenge our figures and say where things are wrong or could be improved. That proves itself in point, because more information was supplied around commercial industrial data in 2016, so we adjusted our placed on the market figures. We have, as I think the NAO report acknowledges, just commissioned WRAP to do some more data work for us that will help to support new targets that we want to set under the resources and waste strategy.
Dr Thérèse Coffey: Every year as part of our submission to the Commission we have to set out a methods statement on how we compile the data, and they have never queried it or challenged it. That does not mean that just because the Commission is happy and the NAO is not, potentially, that we cannot look at this. I just want to flag that it has not been raised before as being of particular concern.
Chris Preston: As I said, I think the European Commission recognise that even among that data there will be elements of contamination that can affect the overall figure, but there is a Commission decision from 2003, or something like that, that says you should not adjust your figures based on that. Small amounts of contamination you might normally find in packaging waste material—that could be a bit of food waste, or a bit of paper in plastic, or glue—are just a normal part of what happens with packaging, so there is an element of reality as well. Obviously, I would love a 100% pure product at the other end, but that is not always going to happen.
Q102 Chair: Can I come back to the EA? I am not satisfied with your answer on compliance inspections. First of all, they have fallen well short of your own targets, so that sounds to me like a problem. We know that there is a high incentive for fraud. You have talked about the criminal trade and of course people are getting money through the PRN system, and your inspections do not focus on companies that your organisation knows to be high risk. So we have the slide from the NAO’s report that shows that back in 2012 there were 400 inspections against your target of 600, but last year the target was 350 and you are only doing 100.
You have told us about the shipments that you have stopped and the clever tracking and the containers, but in 2017-18 there were five companies that were stopped by you. Of the five companies, three had had shipments stopped in previous years. One group of accredited exporters had eight containers stopped in 2017-18, 13 in 2016 and 36 in 2015. These people are at it year in, year out. You know where they are. Why are you not going after them?
Marie Fallon: We are. Can we do better? Of course we can. We accept that in terms of the figures on inspections, we have not met the targets, but the NAO report does acknowledge the work that we have done to address that.
Q103 Chair: Since January this year?
Marie Fallon: No, we recognised with some work we were doing probably last year, or maybe beyond, that our inspection numbers were not meeting target, so we wanted to understand why. We did some work ourselves to understand why, at a local level, our officers were not inspecting the sites that we were asking them to. What we found was that other issues at a local level were often impacting on their ability to carry these inspections out. That could be anything from dealing with a high-risk fire site where there is an incident, or it could be a landfill site where there might be emissions, smells and so on. Often the work of the waste officers at a local level is very demand-driven by local issues, which means that sometimes, unfortunately, they do not prioritise the work on packaging. That is not acceptable. We are in the process of changing the way we deliver that activity in the organisation, and that is acknowledged in the report.
We are centralising the service so that they are not impacted in the same way by issues locally. We will have a central team that will focus very much on the high-risk sites and work together with our intelligence team to make that much better. We accept the criticism and we are not shying away from that, but we knew this already and we were doing some work around that to change it. Inevitably, when you are changing people’s jobs, it takes time to work through the process.
Q104 Chair: The NAO said of compliance activities that the agency carried out “less than 40%” of the number of visits planned in 2016-17. Has the number of visits gone up or down in 2017-18?
Marie Fallon: At the moment we are compiling that information, but as people will have noticed it has been very dry and so our teams have been impacted by the dry weather. We have had three and a half times more incidents than we had this time last year.
Q105 Chair: Fires?
Marie Fallon: No, not fires; a whole range of things—everything from fish kills to pollution incidents, so our teams locally have been affected much more by the dry weather this year.
Q106 Chair: So the heat wave is affecting the inspections of contaminated waste?
Marie Fallon: Yes, because our staff locally have a duty role. As part of our role as a Category 1 responder, we respond to incidents. They may be an EO during the day, but they may well be on the weekend rota to respond to a pollution incident. The impact on the business has been significant. That is not to say that we are not trying to have a risk-based approach.
Q107 Chair: Can you let us have those figures when you have them, please? You sought also to reduce the number of accredited reprocessors and exporters rated as a red or amber risk, and you were trying to get that down to 16, but at the year end there were still five red and 33 amber sites; 19 were flagged as red or amber throughout the year. What is happening with that? Are the numbers going down on that? Do you expect those numbers to go down?
Marie Fallon: We do expect them to go down, in terms of our prioritisation, and we do refuse accredited exporters. It is not that we allow them to continue. Yes, we do expect them to go down.
Q108 Chair: What are you doing with unannounced visits? Only three took place in 2017-18.
Marie Fallon: Again, there should be more of those, but we are trying not to focus all our efforts on compliance visits. We are trying to spend more of our time on the work that we know has been much more effective, which is much more desk-based work and much more working upstream with organisations. Notwithstanding that, we want to make sure that we get the proportion right, so it is about site visits at the ports as well as site visits to the producers themselves.
Q109 Dr Matthew Offord: The NAO also identified a significant number of potentially unregistered companies who avoid compliance. They describe them as “free riders”. Have you made an estimate of the amount of recycling material that these so-called free riders can effectively handle?
Marie Fallon: I think the NAO recognises that it is a complex business. It is a registration scheme, and they have to register themselves. We do not require them to; it is a scheme they have to register for. We do not get a charged income for that work so we again rely on our grant-in-aid in order to do that work.
We do quite a lot of work around free riders, and it is about changing our business model. We recognise that that is an area that we need to do more work on. We have found some evidence of free riding, so we have a special focus team working on that nationally to address some of those issues. We have been quite successful in prosecuting or addressing the issues with individuals. We have been successful in having enforcement undertakings.
Dr Matthew Offord: I did ask if you knew the amount of packaging that free riders handle.
Marie Fallon: It will always be an estimate, so we do not know the exact number. There is no way of having a database where this information is collected, so it is an estimate.
Q110 Dr Matthew Offord: I also understood that there is an officer in the Environment Agency who is dedicated to this role. For last year, of the 64 potential free-riding cases identified, 23% were non-compliant and registered following contact; 23% were referred to area teams to follow up and 36% did not have a result recorded by the agency. It is quite a gap.
Marie Fallon: We are addressing some of those points, in terms of our database, to make sure the information is correct. You may contact a company, and for some of them that is enough. For others, we contact them but it does not make any difference.
Interestingly, we have a scheme at the moment where we are trying to target plastic packaging producers and we have asked them to provide information. Quite a number of them have provided that information, but one company did not so we suspended their permit. Surprise, surprise, they then provided the information and we have enabled them to continue to trade. We are trying to take more targeted action.
Q111 Dr Matthew Offord: What would arouse your suspicion with a company who you suspected of being a free rider?
Marie Fallon: We get some information from other registered companies.
Dr Matthew Offord: So there are whistleblowers on their competition.
Marie Fallon: Sometimes there will be whistleblowers. We act on that when we get the information. But we also do data trawls ourselves of information that is available, and we work through our other databases. It is a combination of things.
Q112 Dr Matthew Offord: Data trawling does not seem very proactive. Someone is literally at a loose end decides to go through the data?
Marie Fallon: No, it is not like that at all. With the amount of information that we have in the agency and working with other organisations, we can bring that information together and then we are able to try to target individuals.
Q113 Mr Goodwill: Turning to you, Minister, this is a bit of an exam question. Where is the polluter pays principle reflected in the Government’s packaging waste policy?
Dr Thérèse Coffey: Good question. I might have to do that as coursework. I will have to get back to you on that. I do not know which precise regulation, but it is there; it is a general approach to everything that we try to do with the environment. We should recognise that when the model was brought in in 1997, it was never intended to be a full cost recovery model. That was not how it was designed. That is the reality of the times of the policy then, which have been largely consistent all that time.
Q114 Mr Goodwill: Obviously, a plastic bag policy would be an example where there was a direct tax on something that was being widely used to pollute the environment.
Dr Thérèse Coffey: It was a direct levy, which Wales was the first to do, then Northern Ireland, then Scotland, and then England joined suit. It has had a significant impact, as everybody knows. It has not entirely eliminated the use of plastic bags, but there has definitely been a noticeable change in them entering into the marine environment, in particular.
Q115 Mr Goodwill: Could I ask a little bit about local authority funding? We have heard that all local authorities are under pressure and they have various priorities, some statutory and some not. We have also heard that with the deposit return scheme, some of the high-value waste could be cherry-picked, and not therefore in the local authority budget. Do you think local authorities have enough money to deal with packaging waste, which they have to collect and hopefully recycle?
Dr Thérèse Coffey: My assessment is yes. There are plenty of authorities out there who collect a wide range of materials today. There are other authorities who choose to collect less. As a consequence, either they put more into landfill or they put more into incineration. We have seen some changes. Some councils, like Westminster, have suddenly started to up their game on what they are prepared to collect from the kerbside. My expectation is that the policies in the resources and waste strategy will result in a significant change to that for our councils, and a lot of that will also be driven by the returns they can get. It is our intention to significantly improve the secondary market.
Q116 Mr Goodwill: The European Union has agreed an amendment to the Waste Directive to require “producers of products to bear financial or financial and organisational responsibility for the management of the waste stage of a product’s life cycle, including separate collection, sorting and treatment operations.” Does the United Kingdom intend to use its new-found freedom to do the same?
Dr Thérèse Coffey: You will have to wait for the strategy.
Q117 Mr Goodwill: Finally, what analysis has DEFRA made of other countries that fully fund collection and treatment of recyclable material through their producer compliance schemes? I am thinking of countries such as Belgium, which has a similar scheme?
Dr Thérèse Coffey: There are not that many countries that have the comprehensive kerbside recycling that we do. They have quite different ways of charging for waste to the consumer, as well. I think I am right in saying the majority of other countries do it on the weight of what you—pay as you throw, as it is often called. Chris might have a bit more detail about what we have been doing considering other people’s methods.
Chris Preston: We are certainly looking at what other countries do and how their systems operate. We might not have done a full and comprehensive review, but the European Commission does it regularly. Bear in mind that it will look at all different types of EU legislation, and how it has been implemented in directives. There will be something on the packaging systems, something on the essential requirements bits, and various other bits of legislation that support the overall waste and recycling packaging policy. The EU has done this. It may be a couple of years old now, but it is certainly out there.
Dr Thérèse Coffey: We certainly want to see businesses themselves recycle more. At the moment, they have a choice over the various providers or whether they use a local authority. We are going to be pushing that quite a lot, and there will be a bit more detail in our resources and waste strategy.
Q118 Mr Goodwill: The feedback that I get from businesses in my constituency is that they have no real incentives to recycle. They are not served in the same way as domestic households are.
Dr Thérèse Coffey: We are conscious that more needs to be done, and that is why specifically tackling that will be included in our resources and waste strategy.
Mr Goodwill: We will watch this space.
Q119 Kerry McCarthy: We are all getting very excited about the waste and resources strategy. I have just a couple of quick questions to finish with, particularly for the Environment Agency. We had these spending categories about PRN investment for those who pay into the system, and we were told earlier on by Valpak, I think, about checks. What checks do you carry out on reported spending—that is, the investment of PRN revenue by reprocessors and exporters in relation to their recycling activities? There were six categories introduced in 2010 that were meant to set out the parameters within which the revenue should be invested. Are you familiar with that regime?
Dr Thérèse Coffey: I do not have it today, but I can provide you with that information afterwards.
Q120 Kerry McCarthy: When Valpak gave evidence, we were told that about four or five years ago the Environment Agency stopped carrying out checks into how that money was spent. Could you do us a detailed note on what efforts are made? When the revenue from PRNs and PERNs is meant to be reinvested in the recycling industry and spent within these six different categories, it is not clear whether that is happening, what sort of checks are carried out to make sure that is happening and whether the system is robust.
Dr Thérèse Coffey: Rather than trying to make up an answer, what I will do is to provide a written response, if that is okay.
Q121 Chair: Do you know why the audit requirements were removed five years ago? Is that part of a red tape thing? Was that a central edict?
Chris Preston: It may have been part of a review of the regulations at the time.
Q122 Chair: The industry is very clear that it has been unhelpful, and we are very clear that it is unhelpful as well. That is why the NAO had to go in and find out where the money goes.
Dr Thérèse Coffey: The transparency of the funding is an issue we are aware of and, again, there will be more in the resources and waste strategy.
Q123 Kerry McCarthy: That was going to be my question. Will you be looking, in the waste and resources strategy, to introduce accreditation checks on how reprocessors and exporters spend the money? Is that something you have been thinking about and taking evidence on?
Dr Thérèse Coffey: It is more that the transparency of funding will be stronger.
Kerry McCarthy: What do you mean by the transparency of funding?
Dr Thérèse Coffey: The actual requirement to say where funding is going only came in a few years ago, and we want to strengthen that.
Q124 Chair: Can I go back to the Environment Agency and this free riders question? The NAO said that of the 64 potential free riders that were identified in 2017, 23 did not get followed up at all by the agency, so nearly 40% were just nodded through.
Marie Fallon: In terms of the work we do with free riders, it may well be that we would not have followed it up if there was not a risk—
Chair: But how do you know what the risk is, if you do not follow it up?
Marie Fallon: Because we will have looked at evidence and data behind the scenes to see whether the information we have been provided is valid or not.
Q125 Chair: The NAO, on page 33 of the report, specifically criticises that approach and says that if you have not quantified the likely extent of fraud and error in the system and have not requested any analysis to inform your oversight, the Government cannot be confident that it has the right scale, nature and balance of compliance activity. That is pretty damning, is it not?
Marie Fallon: I would agree with the NAO making sure we understand the nature of fraud in the system is important, but that is not easy to do.
Q126 Chair: No one is saying it is easy. We have all, as constituency MPs, dealt with waste criminals and dodgy businesses in our own constituencies, but that is the job. But you are allowing 40% not to have any result recorded by the agency, when these are the people you have already identified as risks, and over a third have not had any action taken.
Marie Fallon: That is why we are changing our way of working. We recognise that for some areas of our business, we have not done what we need to do. That is why we are changing the way we work.
Dr Thérèse Coffey: So you anticipate with the centralised team that that will change.
Q127 Chair: We certainly hope so. Finally, on eBay and Amazon, are they not free riders? How much have they paid in PRNs?
Marie Fallon: I have no idea. I can find that information for you.
Chair: There was something about your work with eBay, was there not?
Marie Fallon: There was some reference in the report. We have been doing some work around an area that is particularly risky for us—around vehicle parts.
Chair: What is a vehicle part?
Marie Fallon: If you need a new part for your car—a wheel, or something like that; I’m picking it out of the air—on eBay, there is quite a big trade in car parts. Because of the regulations requiring cars to be properly dismantled, we are investigating some of the selling practices behind that to make sure that the car parts have been properly dismantled and they have met the regulations around hazardous material. It is quite a complicated requirement to dismantle cars, and what we find is that people are not dismantling them properly and they are causing problems.
Chair: But that is not about packaging.
Marie Fallon: It is not about packaging.
Q128 Chair: It is not about eBay, which is a multibillion-dollar business sending packages to our doorsteps, as Amazon does, on a daily or weekly basis. What will the waste and resources strategy do to tackle the free riders, Minister?
Dr Thérèse Coffey: It is an area that is being considered. Chris is the lead expert on the different elements. I do not think we can go into that level of detail without saying a lot more, but are there bits you can share with the Committee, Chris?
Chris Preston: Yes. Online selling is definitely an issue, and it is something that the European Commission has recognised as well, in terms of how it wants to approach that. That is complicated by the definitions in some of the regulations about what constitutes a producer. Amazon will be captured, but some of the people who use it as an online platform may not be. That is definitely something we need to look at and think about.
Chair: I am conscious that we have gone over time. Thank you for your generosity, Minister.