Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Annex 2

Dixons Group plc briefing note for meeting on 24 January 2002 with Rt hon Michael Meacher, MP, Minister of State (Environment)


  Until 16 November 2001 Dixons Group, parent company of Currys, had 12 third party contractors who provided its collection and disposal service for all white goods. These 12 companies are all SMEs which employ up to 50 employees. The three largest of these companies are responsible between them for disposing of around 80 per cent of end of life white goods while the remaining nine disposed of the other 20 per cent. Between them they collected around 300,000 products per year from Curry's customers, relieving local authorities of both a cost and a complex obligation they would otherwise have to meet.

  Since they were forced to withdraw from the recycling of refrigerated products many of these businesses have ceased to be viable. Our Stevenage contractor recently gave notice that it would cease to collect other white goods having already exited fridge collections. It has now exited the scrap industry. We were given notice last week that the company that collects scrap appliances from our Epsom Distribution Centre would cease collection from 18 January 2002 as it too is withdrawing from the scrap industry. As we are unable to find a substitute contractor to collect from Epsom we are now contemplating trans-shipping end of life products from Epsom to the South West to get our scrap dealt with by an existing contractor there. This however would require us to pay a unit fee, at least in the case of the three major contractors who argue that without the cross subsidy they previously had from disposal of refrigerated products it is no longer viable for them to collect other end of life white goods. The additional cost of transhipment combined with a new processing fee may mean that we will be rendered unable to collect any white goods (cookers, dishwashers, washing machines, tumble dryers, etc). This in turn would further increase the pressure on local authorities to meet their obligations to householders in this respect. Currys, like other retailers, does not wish to lose this service for its customers. If, however, these contractors cease operations, local authorities may well have to deal with the disposal of these other white goods on a permanent basis. (500,000 to 600,000 additional pieces excluding refrigeration from Currys alone)


(A)  A recycling credit scheme

  DEFRA officials have broached the possibility of extending the waste recycling credit scheme to cover the disposal of refrigerated products (see annexed outline paper). Under such a scheme the Government would allocate (ring-fenced?) money to fund a per unit fee for each refrigerated unit reprocessed by or on behalf of the local authority. The funding would be based on a flat fee per unit to be paid to recyclers/disposers and paid to them by the local authority on proof of each unit processed. [Working on the assumption that 2.5 to 3 million refrigerated products are disposed of each year funding allocation would need to assume that roughly one in 10 households dispose of a product each year.] The Local Authority could sub-contract the disposal to third party contractors issuing them a credit (ie a cash fee per fridge re-processed.) If the contractors collected from other agents of the customer eg retailers who collect from households when delivering products, the contractor could claim from the local authority for each fridge it had recycled on its behalf. It is likely however that local authorities would only be willing to pay for fridges within their own constituency. This would therefore require contractors to preserve proof of where the fridges originated. It is unclear how this process could be operated or audited.

Problems/issues with such a system

  Would a credit cover the full cost of the extraction/disposal? If it met the full cost there is no incentive for the contractor to keep prices down. However, if it did not meet the full cost it is unclear why the contractor would wish to be in the business. He would surely require the incentive of an opportunity to make a margin on each unit recycled.

    —  The contractor must collect the fridge from the retailer or the householder and demonstrate that the fridge originated within the relevant borough. If there is a margin opportunity then the contractor has an incentive to acquire other fridges from elsewhere in order to obtain the credits. An auditable process to verify origination would be required which would add to administrative complexity and add costs and delays.

    —  Would the incentive be sufficient to get the recycling plants up and running? The viability of such plants would require a steep depreciation curve. Given the finite availability of products containing CFCs (which ceased to be in the refrigerated products after 1996), it is likely that the plants will need to be depreciated over a maximum of three-year period. Contractors would therefore be unwilling to invest without first having a contract covering this entire term.

    —  Could the recycler guarantee sufficient volume over the write-down period of the plant (ie the first three years)? If not the unit cost of recycling will increase.

    —  Would such a system enable major retailers to re-start from their collection services? Theoretically "yes" although it would require each fridge to be postcoded or otherwise identified in order that they could then be matched against funding from a particular Authority. However, recyclers would not then be able to bulk manage all fridges but would have to log each unit and match to an Authority. It is not clear how they could provide evidence to each Authority suitable to meet their grant giving requirements.

    —  Nor does this system alone get round the domestic/commercial waste issue. Local Authorities are only required to collect or accept domestic waste refrigerated products from households. Once such waste is transported by an agent, such as Currys, local authorities and the Environment Agency then reclassify it as "commercial waste even though it is a domestic product, and charge a fee for its acceptance if they accept it all.

    —  Under this scheme the local authority would want to minimise the amount it spent from its recycling credit budget as it attracts no volume bonus for recycling.

(B)  A "Lead Authority" Solution

  Rather than being operated by scores of individual authorities, this scheme would create a system under which Local Authorities could bid for regional lead authority status. The "lead authority" would then take responsibility for all fridge reprocessing within a cross authority region. Under such a system the "lead authority" would be granted funding on a volume basis and would be responsible for collection from civic amenity sites and retailers' collection depots within their region without charge. This would enable retailers to re-start their collection infrastructure and would immediately reduce pressure on Local Authority collection services. The "Lead Authority" would not be required to divide fridges and re-allocate to Local Authorities or postcode areas, speeding up the process, reducing storage requirements and reducing administration. They would be paid from Central Government funds based on volume and the number of fridges they recycle would enable them to fulfil part of their constituent local authorities' targets under the national waste strategy. They would have an incentive to maximise volume processed as the more units they collect and recycle the cheaper the unit cost of extraction. Because they in turn would be negotiating on a contract basis with recyclers rather than imposing a centrally imposed flat fee they would have the opportunity to manage down prices or, potentially, buy from competing contractors.

  Such a system would require licensing which recognised that all these fridges are domestic in origin including those collected from retailers' sites. Retailers would thus be recognised as a channel for domestic disposal ie an agent for the customer rather than the present insistence by local authorities that household units, once removed by retailers, are classified as commercial rather than domestic waste.


  There are some precedents for the creation of such collective management schemes. New local authority powers permit authorities to sell services to each other. The Local Government Act 2000 Best Value regime enables local authorities to provide services for other authorities where this is in the interest of the economic, social or environmental well-being of the area. Some examples are set out below.

(A)  Integrated Waste Management Strategies

  In 2000, Hampshire Council achieved Beacon Status for its development of an integrated waste management strategy in Hampshire. In 1993, Hampshire County Council and the 13 District Councils undertook a public consultation resulting in the introduction of an integrated waste management strategy known as "Project Integra". The delivery of the strategy depended on joint working between all the authorities across Hampshire. To co-ordinate to provide effective waste management the authorities established a joint memorandum of understanding, setting out the principles and obligations of the Project's partners, a tri-partite contract management agreement between the county council, and two unitary authorities working together, a joint service plan agreement and a joint promotional campaign.

(B)  Waste Disposal Authorities

  Alternatively authorities could establish joint fridge disposal committees along the lines of the small number of waste disposal authorities which have been established in East London, North London, West London, Western Riverside, Greater Manchester and Merseyside.

  The Merseyside Waste Disposal Authority is an independent joint waste disposal authority created under the Local Government Act 1985. It has a statutory duty to arrange for the disposal of household and commercial waste collection by the five District Councils of Merseyside.

  The Authority is responsible for the disposal of household and commercial waste collected by each of the five Waste Collection Authorities in Merseyside. This is achieved by way of a waste disposal contract, which is let through competitive tendering procedures. The current contract is held by the Authority's wholly owned company, Mersey Waste Holdings Limited. The services provided by the Authority are paid for by the District Councils of Merseyside, who then include this expenditure in their own budgets and council tax calculations.

  The amount to be paid depends on the charges (known as the Levy) made by the Authority to the individual District Councils. This Levy is made on a prescribed allocation method and the total amount generated is used to fund the Authority's expenditure. [In this case the Authority also has investments in the form of shares in two private sector companies. It wholly owns Mersey Waste Holdings Limited, whose main business is waste disposal operation and the second shareholding is a joint venture in Bidston Methane Limited, who exploit the methane gas in landfill sites by gas sales or power generation.]

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