Net Zero, Energy and Transport Committee

Meeting date: Tuesday, January 25, 2022

Official Report 693KB pdf

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Subordinate Legislation

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Deposit and Return Scheme for Scotland Amendment Regulations 2022 [Draft]

Item 2 is consideration of a draft statutory instrument. I welcome Lorna Slater, Minister for Green Skills, Circular Economy and Biodiversity, who is joined by officials online. I also welcome Maurice Golden, who is joining us for consideration of the instrument. Thank you all for joining the meeting.

The ?instrument ?was ?laid under the affirmative procedure, which means that the Parliament must approve ?it? before? it ?comes ?into force. Following the evidence session, the committee will be invited to consider a motion recommending the approval of the instrument.

We are tight for time, so I invite members to please keep questions, answers and contributions concise. I hand over to the minister for a short opening statement.?

Thank you, convener.

In December, when I announced in Parliament the new implementation timetable for Scotland’s deposit return scheme, I remarked that I was

“looking forward to engaging with members ... as we move into the scrutiny process.”—[Official Report, 14 December 2021; c 84.]

I welcome the opportunity to do so today.

The draft regulations before the committee provide a date of 16 August 2023 for full implementation of the DRS. As you know, an independent review, which was commissioned as a result of the pandemic and the uncertainties that Brexit causes, concluded that the July 2022 implementation date was not achievable.

We have engaged with industry, stakeholders and partner organisations to agree a project plan that will deliver a successful scheme by August 2023, while retaining the original collection targets of 80 per cent in 2024 and 90 per cent in 2025.

I have already announced the milestones in 2022 and 2023 that we will use to monitor progress on delivery, which include the signing of key contracts by Circularity Scotland Ltd, the scheme administrator; the construction of counting and sorting centres; the roll-out of the return infrastructure by retailers; and the launch of a return scheme in Orkney so that we can ensure that our DRS works well in rural areas, which often have different needs compared with more populated parts of the country.

As well as amending the implementation date, we are taking this opportunity to make several smaller amendments to the regulations to support successful delivery and operation of the DRS. The first is to provide additional reassurance to retailers selling through distance sales, who must offer a take-back service. That vital obligation to the accessibility of the scheme will remain; however, distance retailers can now refuse to accept a return of a disproportionately large number of containers in a single transaction.

For products that are filled and sealed in a retail or hospitality setting, such as the kind of can that is known as a crowler, the person who fills and seals them—the pub, for example—will be the producer and will bear responsibility for their collection.

Businesses that qualify as producers only because they sell crowlers will be exempt from the annual fee to register with the Scottish Environment Protection Agency, which has been raised slightly from £360 to £365 to cover the cost of regulating those extra producers. The new regulations also make a small number of amendments to prevent fraud and support SEPA effectively to enforce compliance.

I thank members for their time. I truly believe that the proposed changes will help ensure that Scotland will have one of the most effective deposit return schemes in the world. I look forward to working with the committee to make it a success.

Thank you, minister. We now move to questions.

As requested, I will cut to the chase, minister. How much will setting up the scheme cost, and will local authorities be compensated for the potential revenue and job losses that some have theorised will happen?

In line with the principle of producer responsibility, the drinks producers will pay for the costs of setting up and operating the scheme. Our estimates of the costs of operating the scheme are set out in publications such as the full business case addendum. The FBC addendum estimates expenditure of £92.9 million per year for Circularity Scotland in a steady state. You can see that those costs are not being borne by local authorities; they are being borne by industry, under the principle of polluter pays.

I am not sure that that answers my question, minister, because there will obviously be a scheme cost to the public purse to set it up. Perhaps you can come back on that if you are aware of such costs and they have been sorted out.

Secondly, has the Government strategised any scheme to allow smaller businesses to attract and retain customers in a similar manner to the big supermarkets, which presumably can incentivise customers through their loyalty schemes?

I am not aware of any such schemes. My officials might have information on that.

There is not a scheme as such. I suppose that we would agree with the member that there is a good opportunity here for small businesses to boost their footfall by operating a return point; we think that that should be an advantage for small businesses. We have taken steps to make it easier for retailers to operate return points, such as creating an exemption from non-domestic rates and from planning permission, subject to certain conditions, for having reverse vending machines. We have taken steps to make it easier for them to operate a return point, if that answers the question.

It does, up to a point.

I have one more question, minister. As you will be well aware, other jurisdictions are trialling a digital DRS system, which—certainly according to the research that I have done—would be cheaper, have a lower carbon footprint and be easier for people to get involved with. That begs a question: has the Scottish Government conducted, or will it conduct, a business case and feasibility study for a digital DRS? Will businesses that have set up your DRS be compensated—and if so, by whom—for what would presumably be an obsolete outlay if a digital DRS is ultimately introduced in Scotland?

The digital DRS is a very interesting technology, and Circularity Scotland and the Government have looked into it. It is not quite yet mature enough to be implemented on the timescale for our DRS. However, we are aware of it, and Circularity Scotland intends the reverse vending machines that it advises businesses to install to be compatible with future digital schemes, so that there should not be any problem with moving to such a thing in the future. It is an exciting technology, and when it is mature, we will look at implementing it. I am sure that that will be the case.

I hand back to you, convener.

Mark Ruskell is next up, to be followed by Natalie Don.

The gateway review that came out last summer identified some risks with going even for the August 2023 date for implementation. What work has been done to look at those risks? How are you mitigating some of them? Everybody wants a deposit return scheme as quickly as possible, but clearly it needs to be up and running with the full confidence of retailers and the public. Can you identify what risks around the August 2023 date remain and how they are being considered?

Despite the pressures over the past year, Circularity Scotland has taken some very important steps since it was established in March 2021. It has established itself as a limited company and secured approval as a scheme administrator. It is currently securing start-up funding and appointing key staff. I have been meeting the organisation monthly and will continue to do so throughout the implementation, to ensure that it is on track.

We have agreed some milestones. We expect to see significant progress in the coming months, including the signing of contracts with partners to deliver the logistics, operations and information technology systems—we expect those contracts to be signed by March 2022. We expect the launch of a public awareness campaign in August 2022, so that businesses know that they need to sign up to the scheme and the public know that it is coming. We will also begin to build counting and sorting centres in August 2022.

I am confident that we have the milestones and robust governance and oversight to make sure that the scheme will happen. It will be done in a transparent way. We will show the public pictures of the sorting centres being built, and people will be able to start to learn about the scheme.

That transparency will be welcome. Our predecessor committee asked for milestones way back in 2019, and I do not think that it got them, so the fact that we have them now is good.

What would happen if the committee decides not to vote for the statutory instrument today? What would be the implications of that?

As you know, the independent gateway review concluded that it was not possible to meet the original date of July 2022, as that would not have given the 35,000 producers and retailers involved enough time to comply with the regulations. We want the scheme to be a success, and that means allowing the scheme administrator and businesses time to implement it properly. It involves setting up the IT system, building the sorting centres and working out all the logistics, particularly around online take-back. Those things take time.

Unfortunately, Brexit and the pandemic led to our getting started with the scheme a bit later than we all hoped but, now that we have a plan, milestones and a scheme administrator, we are going full steam ahead.

Good morning, minister. My first question has just been answered, so I will move on to my two further questions.

One thing that makes Scotland’s deposit return scheme so ambitious compared with schemes in other countries is the inclusion of glass. That has been criticised by some, and there are concerns that, if the scheme leads to more glass being crushed, that might mean less glass recyclate available for the industry. Can the minister guarantee that that will not happen?

Absolutely. The deposit return scheme will significantly increase the quantity and quality of glass recyclate, creating an aggregated and high-quality feedstock for reprocessing. I understand that Circularity Scotland proposes that the glass be collected whole or naturally broken and absolutely not mechanically crushed, which is compatible with closed-loop recycling. Section 34 of the Environmental Protection Act 1990 requires those handling waste to ensure that it is handled in a fashion that “promotes high quality recycling”. Return points, producers and Circularity Scotland, when handling return scheme packaging, including glass, will therefore have an obligation to promote high-value recycling.

Scotland’s code of practice for managing controlled waste makes it clear that

“the use of recovered glass cullet in re-melt applications to create new glass products”

is considered an example of high-quality recycling and so should be prioritised. The current best practice is not to crush the glass, so that is not the intention.

Thank you for confirming that.

We have also heard concerns from parts of the industry that have raised issues about legacy containers, by which I mean containers of products that were produced prior to the regulations coming into force. That seems to be a particular issue for producers and retailers of products such as whisky, which can sit on shelves for a long period. Can the minister clarify exactly how such containers will be covered by the scheme?

I absolutely understand the problem around legacy containers, particularly in the whisky industry and similar industries. Stock that is placed on the market before 16 August 2023 and that is therefore not deposit bearing will continue to be legal for sale after that date, with no end date set in the regulations. That is different from a number of other schemes, which set an end date. We had Scottish producers such as the whisky industry very much in mind when we made the decision to allow that.

Good morning. The Government is relying heavily on the gateway review, which has been mentioned. The committee has had a submission from the Association for the Protection of Rural Scotland, which says that the gateway review and assurance of action plan is weak and has “many shortcomings”, one of the most obvious of which is the

“skewed choice of organisations interviewed.”

The submission goes on:

“Fully 40% of those spoken to were either Scottish Government or under their direct oversight ... and another 40% were producers or retailers. No organisations interviewed were operators of deposit return schemes”.

The association is also concerned that domestic and international experts were not spoken to, and says that that is the equivalent of

“trying to work out whether a vehicle could be fixed without speaking to a single mechanic.”

Is the association wrong?

10:00  

During the gateway review, a wide range of stakeholders from across the public, private and third sectors took part in the discussions with me, my officials and/or the gateway reviewers. We published a full list of participants in the business and regulatory impact assessment.

The gateway review gave a preparedness estimate of 12 to 24 months for individual stakeholders, including retailers. That informed its judgment that a full implementation date of July to September 2023 was possible, albeit with significant risk. That was reinforced by our wider stakeholder engagement.

While an individual business might be in a different position, I have considered the circumstances that face the industry as a whole. It is essential that the scheme is a success not just for the short term, but for decades to come.

The gateway review, which followed standard procedure, focused on what would be a deliverable timetable and made recommendations on the governance programme to improve the likelihood of success. We supplemented the review with meetings with a wide range of industry representatives and environmental non-governmental organisations, as well as drawing on wider intelligence, including evidence from other schemes.

Those were the highlights of what the Association for the Protection of Rural Scotland said. Concerns have also been expressed by the Marine Conservation Society, whose submission focuses on the environmental impact of your proposed delay. It reminds us that we are in

“the midst of an intertwined climate emergency and nature crisis”

and says that

“Scotland’s seas and beaches are bearing the brunt of the delays to DRS.”

What will be the environmental impact of your proposed delay?

I promise you that no one wishes more than I do that it would have been possible to implement the scheme in July 2022. The scheme that we have set out will be implemented as quickly as practicably possible. The independent gateway review concluded that July to September 2023 was the soonest that that could happen. We have worked with industry, Circularity Scotland and other stakeholders to narrow that down to the specific date of the middle of August 2023.

The risk of having a scheme that does not work on day 1, that is less ambitious and that, for some reason, does not get public support and momentum or get retailers and producers on board is much greater than the risk posed by the unfortunate but necessary delay that we are proposing, in order to make sure that the scheme works from day 1 and is ambitious, rather than watered down. The scheme will be with us for decades and will have a hugely positive overall effect on our environment.

The next question comes from Fiona Hyslop.

Monica Lennon covered some of the area that I wanted to ask about. Does the minister have any final message to those who are concerned about the environmental impact of plastic pollution in particular?

We are all very concerned about not just the impact of the plastic waste that litters our seas, but the cost to our local authorities of having to process that excess waste. We can all look to work towards our waste targets, which will reduce the total amount of waste that is produced in Scotland. The deposit return scheme will do that. It will have a significant impact by taking tens of millions of pieces of plastic waste out of circulation and making sure that they are part of the high-value recycling chain.

The scheme also opens up the possibility of investment in Scotland in relation to the building of recycling centres and all the businesses that are required around the logistics. It represents a really exciting step forward in the circular economy and reducing waste.

Maurice Golden is next.

I have some short, simple questions. On what date were you aware that there would be a delay to the scheme?

As I said in my statement to Parliament on 17 November, at that point my officials and I were continuing to work hard with Circularity Scotland and the wider industry to agree a final timetable and clear milestones for delivery, including interpreting the impact of the United Kingdom Government’s decision on VAT, which had just been communicated to me.

Having carried out further work after that first address to Parliament, we identified a date, which was the subject of continuing analysis and discussion between me and various stakeholders. I announced that date to Parliament on 14 December. It was very much the subject of continuing assessment and review as new information came in and as we listened to different stakeholders.

At the time of the November statement, were you aware that there would be a delay to the scheme—yes or no?

At the time of the November statement, the matter was under discussion between me and different stakeholders. It was being assessed, and I committed to doing that assessment by listening to environmental NGOs, business and industry and Circularity Scotland, and reading the result of the independent review. That decision was very much under full assessment. We needed to make sure that we had spoken to everyone who mattered, including all the stakeholders, and had taken a careful decision. That decision was finalised when I made my announcement to Parliament on 14 December.

Were you aware that, prior to the November statement, Circularity Scotland issued tenders that had a start date for Scotland’s deposit and return scheme that was later than 2022?

In line with the principle of producer responsibility—the polluter pays principle—Circularity Scotland is a private company. It was established by the industry to lead on the delivery of the DRS. As an independent private company, its procurement decisions and processes are its business and not for Government intervention.

Circularity Scotland proposed a date in 2023—June 2023—in October. Were you aware of that or not?

The procurement procedures of Circularity Scotland, as a private company, are its business, not the business of the Scottish Government.

In the interests of transparency, which the minister has committed to, will the Scottish Government instruct Circularity Scotland to comply with freedom of information requests?

I would need to get my officials to confirm this, but it is a private company and, as far as I know, private companies are not subject to FOI requests. Such requests are about transparency within the Scottish Government.

Zero Waste Scotland has a policy of generally complying with FOI requests. Who created Circularity Scotland as a private company?

FOI legislation and environmental information regulations, to boot, do not apply to Circularity Scotland, as it is an independent private company. It was set up by a coalition of drinks producers, retailers and wholesalers back in February 2021. It was not set up by the Government, and the Government does not have a power of direction over it.

Thanks. I am aware of that.

This is my final question. How many staff worked for the scheme administrator in 2016, 2017, 2018, 2019 and 2020?

The scheme administrator was brought into being in 2021. As far as I know, the business started up in 2021, and it has since been hiring staff and doing all the usual things that a start-up business does.

No staff. Thank you, minister.

Minister, one of the key questions in this area is where the DRS vending machines will be sourced from. Given the further delay in implementing the scheme, can you guarantee that all the DRS vending machines will be built in Scotland, thereby avoiding highly paid jobs in manufacturing and technology being offshored?

There is definitely an interest in where the DRS vending machines are made. There is a problem with sourcing them, due to Brexit and other challenges. I am not able to provide a guarantee, because it is for Circularity Scotland and the industry to decide on their own procurement procedures, but of course we all very much hope and intend that as much of this as possible is done in Scotland.

Thank you. As far as I can see, there are no more questions, so we will move to our next agenda item, which is formal consideration of motion S6M-02582.

Motion moved,

That the Net Zero, Energy and Transport Committee recommends that the Deposit and Return Scheme for Scotland Amendment Regulations 2022 [Draft] be approved.—[Lorna Slater]

Are there any contributions from members? If you wish to contribute, please put an R into the chat bar.

I have listened carefully to the minister and to colleagues, and I have read the briefings from interested stakeholders. It is very disappointing to have the further delay on top of previous delays.

I welcome the ambition, but there has to be more than a paper exercise. I am very concerned about the regulations, and I would like the Government to bring them back to Parliament with a scheme in which everyone can have confidence and which takes account of the concerns that the organisations that I mentioned earlier have raised. I would find it very difficult to give my backing to the proposed regulations as they stand.

If we are ambitious and serious, we have to find a way to make the scheme work. I have read that not everyone is impressed by the gateway process and not everyone feels included. A lot of lobbying has gone on.

Maurice Golden was right to pursue questions of transparency. People are not making party-political points; we really want the scheme to work. I know that the minister, in her heart, wants it to work, so she has to think again.

I was not going to speak but, having listened to the minister’s evidence sessions today and previously, I feel compelled to do so.

My friend Monica Lennon spoke rather well just now, and she made some really important points.

The regulations have been half a decade in gestation, and we are now being told that they will be delayed again. The minister blames several extraneous factors. That is rather difficult to square with the reality. Our friends elsewhere are striding on with schemes that are constructed differently and which, evidence suggests, might be effective and future proofed. That relates to my earlier question.

The minister has rather struggled to answer several direct questions from across the political spectrum, and the answers that have been given have lacked detail. As Monica Lennon rightly said, we are all, across the parties, keen to see a workable, effective and successful scheme as soon as possible. The minister has talked positively about what a scheme can achieve and its benefits, but I am very concerned that its detail, depth and finances remain opaque.

This is a debate. I respectfully request that, in closing, the minister gives clear details of commitments and figures on the funds and the likely cost to the public purse, which I asked about, in order to allay my and possibly others’ significant concerns about what is proposed.

It is fair to say that everybody on the committee is concerned about the delay, and I imagine that the minister is concerned, too. The original regulations that were put in place under the Climate Change (Scotland) Act 2009 gave the Government the opportunity to move quickly on a DRS scheme, and that opportunity was not taken at the time.

The minister has been put in a very difficult position with the establishment of Circularity Scotland only last summer. The fact that there is now a commitment to milestones and that we are going to hold Circularity Scotland to account—there is a critical role for the committee in doing that—gives me a lot of confidence that we finally have a minister who will deliver the DRS rather than its being the vague commitment on which previous ministers have not moved quickly enough.

I read the ENGOs’ briefings, and I am as frustrated as they are that the scheme is not already in place. However, we have to bear in mind that it is incredibly ambitious—it is the most ambitious scheme in Europe. It is not as if we are following the path of other small countries that might have put in place a scheme for plastic bottles with larger retailers to start with, and then considered moving over to cans or maybe to an online scheme, adding glass a later date. We are trying to deliver an all-singing, all-dancing, ambitious scheme in the quickest time possible.

Parliament agreed a hugely ambitious scheme way back in 2019, and it would be really disappointing if members of the committee turned down the SI and effectively voted down progress on the DRS. All that that would do would be to create even more delay. It would force the Government to reconsider the scheme from square 1, create uncertainty for business and, ultimately, impact on our environment, including our marine environment, and on climate change.

Monica Lennon said that she wants to make the scheme work. So do I. We are all disappointed that we are where we are, but we have an opportunity now to move at pace. I want the scheme to work, so I will vote for it. I hope that other members will, too.

10:15  

Liam Kerr said that the regulations are being delayed again. No—the regulations will be delayed only if the committee and the Parliament do not approve them.

The scheme is a hugely important one for tackling waste in Scotland. Undoubtedly, there have been some challenges and, indeed, disappointments along the way in trying to deliver it. However, in terms of innovation, the reach of the scheme and what it will deliver, I can tell the committee that, in my constituency, the supermarket chain Aldi has already introduced its first pilot deposit and return scheme.

Scotland wants us to get on with the scheme. Yes, we need to scrutinise it. I have listened to colleagues, and I recommend that the committee should take a strong line in scrutinising the development and implementation of the scheme. However, the Parliament has a duty and responsibility to tackle waste and to drive forward our agenda on net zero and wider environmental issues, and I strongly recommend that the committee should vote in favour of the statutory instrument.

Really ambitious schemes are being delivered throughout Europe. Wales, Northern Ireland and Portugal are trialling digital schemes, and Latvia has a traditional but more ambitious scheme, with refillable and standardised bottles. However, I have real concerns about the delivery of the scheme in Scotland. It appears that the minister is not in control of Circularity Scotland. Therefore, how can we as parliamentarians have any confidence that this shambolic scheme, which is shrouded in secrecy, will be delivered?

It is worth noting that the Scottish Government could have set up an independent non-departmental public body to deliver the scheme, but it chose to create a private company, which now refuses to reply to FOIs that I have sent to it. There is a big question with regard to secrecy. If the minister was not aware that Circularity Scotland was issuing tenders in October 2021 with a launch date of June 2023, how can we possibly be assured that the scheme will be delivered on the new, delayed date? I urge members not to vote for that delay at this time until the questions around transparency are answered.

That is the end of contributions from members and witnesses. I pass back to the minister to sum up the debate, please.

I appreciate the depth of feeling on the issue and everybody’s frustration with the delays. As I said earlier, there is no one who wishes more than I do that we could have kept to the original July 2022 date, so I completely understand that.

The plans that are currently on the table, with milestones agreed with Circularity Scotland, include really ambitious things, such as getting the IT systems in place, buying and setting up sorting centres, setting up all the logistics, registering the 35,000 retailers in Scotland that need to sign up to the scheme, and acquiring the reverse vending machines. I am confident that we can deliver that by the new date of August 2023 and that that date is, indeed, the quickest possible timeline. In fact, that date comes with potential risks, especially for small businesses and breweries, which have struggled so much during the pandemic.

I understand Mr Golden’s frustration, but it is an industry-led scheme—that is the whole point of it. It is on the basis of the polluter pays principle. We live in a time of scarce resources. Rather than using the public purse and taxpayers’ money to set up the scheme, industry is setting up the scheme itself. That has the advantage of industry paying for it. However, that also means that the scheme is one step removed from Government and not subject to FOI and so forth.

The approach has the advantage of industry expertise. The industry is absolutely incentivised to bring in the scheme philosophically, as it understands its importance to the environment, and because the scheme will generate about £600 million a year. There is a lot of money to be made, and industry knows that. The scheme will be a good boost for industry overall, with a lot of opportunities for business in Scotland. Industry knows that and supports the scheme, and we have agreed that timeline. I really hope that the committee supports the new timeline, because that is our best chance of getting in this ambitious scheme as soon as possible.

Thank you very much, minister.

The question is, that motion S6M-02582, in the name of the Minister for Green Skills, Circular Economy and Biodiversity, be agreed to. Are we agreed? If any member does not agree, please indicate that in the chat bar.

I see that we are not agreed. There will be a division. As we are voting remotely, I suggest that we have a quick roll call for each member to confirm their voting intention. I will do that in alphabetical order. I remind members that the choices are “For”, “Against” or “Abstain”.

The ambition is not being delivered, and the minister has not answered the questions that were posed by Maurice Golden in particular. I abstain.

For

Natalie Don (Renfrewshire North and West) (SNP)
Jackie Dunbar (Aberdeen Donside) (SNP)
Fiona Hyslop (Linlithgow) (SNP)
Mark Ruskell (Mid Scotland and Fife) (Green)

Against

Monica Lennon (Central Scotland) (Lab)

Abstentions

Liam Kerr (North East Scotland) (Con)
Dean Lockhart (Mid Scotland and Fife) (Con)

The result of the division is: For 4, Against 1, Abstentions 2.

Motion agreed to,

That the Net Zero, Energy and Transport Committee recommends that the Deposit and Return Scheme for Scotland Amendment Regulations 2022 [Draft] be approved.

The committee will report on the outcome in due course. I invite the committee to delegate authority to me as convener to approve a draft of the report for publication. Do members agree to do that?

Members indicated agreement.

That ends the session on the statutory instrument. I thank the minister, her officials and Mr Golden for attending.

I suspend the meeting briefly so that we can prepare for the next agenda item.

10:22 Meeting suspended.  

10:25 On resuming—