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

Examination of Witness (Questions 200 - 219)



Mr Borrow

  200. From your last couple of comments I get the distinct impression that your company is somewhat reluctant to make an investment decision in terms of the plant.
  (Mr Jones) There is no way we are going to invest in a plant under the current circumstances, because we have no guarantee. We are delighted now that we have standards that are issued, but these will not be effective for maybe another month and even then we have no guarantee on our own experience that the organisational structure in the Agency will guarantee a level playing field on enforcement.

  201. Your criticism initially was about the delays within the DTI and DEFRA and DEFRA's predecessor in agreeing what the regulations meant?
  (Mr Jones) Sure.

  202. Since we have been aware of what the regulations mean, your criticism now is whether or not the Agency that is responsible for enforcing the regulations can do so in a competent way which allows your company as a waste management and disposal company to operate properly in the market place?
  (Mr Jones) Yes, in terms of the regulatory framework. The third dimension is on the financing. There are grave issues on how this is funded.

Mr Martlew

  203. Biffa used to collect our bins in my constituency and their performance is not half as good as yours, but you lost the contract.
  (Mr Jones) It happens.

  204. On a technical point, we are talking about the foam. There are two-thirds the amount of CFCs in the foam as there is in the coolant. Does it get into the atmosphere the same or is it kept in the foam?
  (Mr Jones) Historically, before all this came along, the foams tended to go through car fragmentation plants which are very large, rotating drums with ball mills. You have very large balls and flails inside these rotating drums and the foam is basically pulverised. If you imagine the foam enlarged, it is like a whole series of balloons and as those balloons pop the gases are emitted as it is crushed. The whole point of car fragmentation plants is that you take an 800 or 900 kilo object, a car, and you beat the living daylights out of it into tiny fragments and pass them over magnets. You are left with the foam in a material called flock or fluff which is very tiny and the gas is squeezed out physically. In the new plants, the best standards which are envisaged by these process are that all this happens but it is in a plant specifically designed for fridges, either physically or through thermochemical processes, and the fridge is dealt with in a contained atmosphere. There are no emissions to the atmosphere.

  205. In a situation where the fridge goes to landfill, you have taken the coolant out; what happens to the gas and the foam then? Is it going to stay in the landfill?
  (Mr Jones) Very few fridges went to landfill. If you stuck them in a hole in the ground or in a warehouse indefinitely, yes, the foams would stay there just as they do in your kitchen. It is only when you start physically beating the thing to bits.

  206. The coolant goes straight into the atmosphere; the CFCs in the foam, if you left them in landfill, would stay in the ground or get released when being destroyed?
  (Mr Jones) Yes. Because ferrous scrap had value, they were a useful adjunct to the cash flow of car fragmentation plants and they tended to go through that route. As a result, most of the 1,500 tonnes of CFCs each year went up into the sky, although some of it would have been recovered by draining out. The liquid would have been recovered in a number of local authority civic amenity sites.

  207. Originally, you started to look at this as a business opportunity and you got the translation or whatever. You have now decided that it is not a business opportunity and Biffa is not going to build one of these plants even though some of your competitors are. Is that correct?
  (Mr Jones) Yes. We are working in partnership with European Metals Recycling, which has about 60 per cent of the United Kingdom's ferrous scrap market. They are investing in the technology but my latest information is that they have substantially scaled down the number of plants that they are planning to invest in because they, like us, have growing uncertainty as to whether or not they are going to get an economic return.

  208. It is a question of risk really?
  (Mr Jones) It is entirely about risk.

  209. Can we come to the costs of disposal? Who do you think should bear the costs of this in the long term?
  (Mr Jones) We have maintained for six or seven years now that the most just, strategic way of approaching not just fridges but all of these consumer goods in the environment, whether it is tyres, electronics and electrical goods, pesticides, household hazardous goods, is that the cost of end life management for these products that are now deemed to be polluting should be incorporated in their selling price at the front end of the process. Having said that, we have also suggested that manufacturers would think that is about as sensible as turkeys voting for Christmas. We have lobbied hard with DEFRA and the DTI and the Treasury for suggesting that these costs cannot suddenly be dumped on industry out of the blue and that there should be some pre-agreed mechanism where the government helps those industries to transfer that cost in gradual stages. The mathematics of that for fridges is that the value of United Kingdom fridge sales in the economy at the retail stage at the moment is about £700 million a year. That is what the value of fridges is to the GDP. The VAT on that is about £130 million. That is what the government gets from the whole supply chain. The cost of having a fully auditable, well run, transparent, end life retrieval system using state of the art, probably European technology is between 50 and 60 million. With that, I mean call centres, entries in Yellow Pages, guidance notes for local authorities, payment to local authorities. We are talking about a ten per cent increase in the price of fridges. The decision in this whole process between DEFRA, the DTI and the Treasury is do we react on a back foot basis, as has been happening, and just throw money to local authorities, give them the 50 million and say, "Get on and manage it as best you can" to about 480 different bodies; or do you instead marshal that money and say to the manufacturers, "I will give you that money but I will chop it down by 10 or 15 per cent progressively. You sort the problem out and from 1 January you come up with your solution. I will make sure, as government, that that system is overseen by the Office of Fair Trading, that it is seen to be subject to open and fair tender."

  210. You know the waste disposal industry very well. You have been referring to cowboys, where they will take a landfill site, fill it full of rubbish and toxic waste at that, and then go into liquidation. If the consumer pays at the beginning, how can they be assured that when the fridge, in this case, has to be disposed of in 10 or 15 years' time the company that had the money in the beginning is still in existence?
  (Mr Jones) You make it immediate. It would be perfectly feasible to make all fridge manufacturers liable from 1 October and to say to them, "We agree that the cost of processing fridges from 1 October next is £20 per fridge, so we will allow you to drive through a £20 increase in the cost of fridges through the retail supply chain."

  211. Where does that £20 go?
  (Mr Jones) That would have to be held in a sinking fund.

  212. Basically, what we are talking about in reality is government imposing another tax.
  (Mr Jones) These are taxes that are coming from Europe. In my submission, I suggested that the total cost of the looming, extant European legislation for electronic goods, packaging regulations and so on is somehow going to cost this country about £4 billion to £8 billion a year. At the moment, going back to the wood for the trees parallel, nobody is having this strategic debate as to how those costs are going to get translated through to us as private consumers.

  213. I am still not convinced. When I buy that £200 fridge and I pay the extra £20, I am not convinced that that money will be there at the end of it unless that money either goes into some sort of bond or is collected by government, who then say at the end of the cycle, "We are responsible." I just do not trust businesses to have the money at the end of 10 or 15 years. They may not be in existence.
  (Mr Jones) You are quite right. It is not for me to put forward a precise suggestion as to how it might operate but it is a bit like the National Insurance fund, in a sense. Maybe you would say, "As a politician, I do not agree that the private sector would keep that money." The private sector will say, "If it comes through as a tax, equally have we the certainty that the government will fund the process?" Maybe we need to look at it in the context of people like the Waste Resources Action Plan and those sorts of organisations. Without coming up with a solution, I am urging that there should be the debate because if we have that debate I am absolutely convinced we would end up with a body that would deal with it a heck of a lot more successfully, transparently and efficiently than the mess we have at the moment. Bearing in mind that we are going to have another mess, is the government going to give local authorities probably about 150 million to sort out end life cars until 2007 when the manufacturers become liable for the costs? Is it going to do the same thing for tyres? Is this the due responsibility for government to do these things? Maybe it is a buffer body in the middle that is an environmental sinking fund to manage this transition.


  214. The current way of disposing of fridges is effectively self-financing because the retailers told us they have this take away policy. They give them to people who are in the recycling business and nobody seemingly has to pay a bill for getting rid of fridges at the moment.
  (Mr Jones) That was the case up until November.

  215. Who do you think should pick up the bill for these piles of fridges that are mounting up from November and what about a resolution of the discussion you have just had with Mr Martlew about who pays in the future? We seem to have an immediate disposal problem for which we do not have any cash.
  (Mr Jones) Correct. You have £6 million I believe on offer in the form of short term subsidies but that £6 million, on our calculations, simply represents maybe about six weeks' funding of this problem. If you look at the best technology in line with these operating standards from the Environment Agency together with the logistics costs, the truck movement costs, I think people now recognise this is going to cost UK plc about £40 million to £50 million a year. It is a good question: who is going to pay? At the moment, there are people out there getting £20 a fridge. I understand that our friend in Michael Meacher's constituency is charging £20 a fridge. Where is that money when the day of reckoning comes? That is why Mr Martlew's comments are entirely justified if indeed he comes to knock on the private sector door and somebody has thrown away the key. It has happened on tyres, nappies and medical incontinence waste in the past. That is why we believe that companies like us are not in that game. I am not suggesting that those people in the north west are either but I am suggesting that they should be subject to the same levels of scrutiny that we would expect to be subject to.

Patrick Hall

  216. We seem to be in real difficulties, do we not?
  (Mr Jones) Yes.

  217. In looking ahead at this issue and the possibility that you will be involved commercially, have you had discussions with waste management companies that are operating elsewhere within the EU? If so, is not the picture a more coherent one in some parts of the EU commercially as well as in terms of government action?
  (Mr Jones) Yes. We do operate in Belgium. Belgium is interesting because it is a cockpit of both the commercial as well as the technological processes that different European countries use for the management of different products in the waste system. The tendency over there is for local authorities to be paid by the manufacturers for their share of the holding operation in the end life management of processes. Indeed, it is recognised that the end life price for the new product incorporates the end life management cost. Every month that slips by, we are ratcheting up £4 million of costs for somebody and most local authorities think somebody is the Treasury. I am not sure whether the Treasury would agree with that but at the moment we have a pool of fridges out there. Some local authorities have realised that the people they have been giving them to are maybe not quite able to give the assurance they would like about where their money is going or what is going to happen. Some are shipping fridges back to Germany. They are using the money. Again, I think I said in my submission it is quite an erratic process because the funding formula for the six million has been operated under the Barnett formula, so it is quite random. It does not bear any relationship to the way that fridges are necessarily being produced.

  218. You have a company in Belgium but is your trade association in contact with other players on the continent, some of whom do not seem to be embroiled in the enormous difficulties that we are discussing this afternoon? Is there better practice that you are aware of and are researching?
  (Mr Jones) Yes. The trade association is certainly doing that on our behalf, not just in relation to fridges but in relation to a whole raft of other things. In some countries, those costs are charged through. If you look at the charging structures for waste in Europe for domestic rate payers, generally, they are three, four or five times higher than they are in this country: £50 a year per household in this country for collection and disposal of refuse. In Europe, you are talking about rates of the order of £200 to £250, about £400 to £500, so it is of an order of magnitude where consumers accept that local authorities will manage that waste but also get paid for it.

  219. In terms of being prepared to implement the regulations that we are talking about, there are different standards across the EU, are there not? There are places like Germany perhaps where there was already a high standard and maybe then it was easy to implement the regulations. There are other places, not just the United Kingdom, where there have not been high standards and perhaps the regulations are causing problems there as well. Are you able to look at that, to learn from it and try and advocate better practice here?
  (Mr Jones) Yes. It is part of the reason why we are saddened that it has taken us a year of lost time because most of the focus in that intervening period has been looking at technical specifications. Very little time and effort has been spent on looking at the funding implications, whether it is Mr Martlew's fund held by the government or by a quango or a neutral body, or whether it is administered purely through producer responsibility. No in depth research has really been undertaken on a communal basis. We have done our own work; our trade association is doing some work, but when you look at the trade associations for fridges, electronics or the automotive industry, it tends to be binocular vision. They tend to be looking in the context of their own products. Nobody is addressing this macro issue of how the United Kingdom could benefit itself by reviewing these different European methods of funding and coming up with our own integrated solution.

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