Select Committee on Trade and Industry Minutes of Evidence

Annex 3

The Need for Effective Arrangements for the Disposal of End of Life Vehicles



  1.1  The purpose of this paper is to put forward a case for a system that will ensure that the requirements of Article 5.2 of the End of Life Vehicle Directive (ELVD) are met. The rationale behind this is that the current system of vehicle licensing and tracking falls down the closer a vehicle gets to the end of its life.

  1.2  This paper considers the arguments for the introduction of an Automotive Recycling Credit Scheme (ARCS), which will ensure that all ELVs are attracted into an authorised treatment facility (ATF).


  2.1  Article 5.2 of the End of Life Vehicle Directive (ELVD) requires that "member states shall also take the necessary measures to ensure that all end of life vehicles (ELVs) are transferred to an authorised facility".

  2.2  The ever increasing problem of abandoned vehicles in the UK, and the cost of their disposal by local authorities, illustrates the inadequacy of the current vehicle, licensing and de-registration system. This is the result of several factors:

    —  there is no statutory requirement to provide proof of notification of change of ownership. As a result, it is possible to claim that a change of ownership has been notified by post and the new owner (whose name and address has been lost!) is now responsible for the vehicle;

    —  there is no requirement to prove the existence of the purchaser of a vehicle. Again, this makes the pursuit of a last owner very difficult, as the notification of sale of a vehicle to someone who does not exist cannot be prevented;

    —  the Statutory Off Road Notification (SORN) system does not represent a cost to the owner, and does not require any proof that the vehicle in question is still in existence. Thus a vehicle can be registered for SORN, but be disposed of outside official channels. The burden of SORN once a year would be negligible and would disappear with a change of address.

    —  the pursuit of last owners who abandon vehicles is expensive and usually fruitless. Even if a last owner can be found, they frequently do not have the funds to pay any imposed fines; and

    —  as the value of scrap steel has fallen, the market for ELVs has moved from positive to negative. Where once vehicle dismantlers and scrap merchants would buy ELVs, now in many cases they require payment to accept and dispose of them. (In the mid-90s when the price of scrap steel was at an all time high, abandoned vehicles were very rare).

  2.3  This all points to a need to have in place a system that will ensure proper, and comprehensive, "tracking" of a vehicle from the initial sale to the first purchaser right through to its disposal as an ELV. This will ensure that criminal activity linked to vehicles will be minimised, and possibly stopped altogether. The system needs to be flexible, eg to take account of those who may wish to "de-licence" their vehicle for a period of time. The following options consider the merits of two alternative schemes.


  3.1  A possible way to deal properly with the problem of ELVs would be to introduce a compulsory de-registration system. However, as can be seen from the background set out above, the introduction of a compulsory deregistration system will be extremely expensive requiring as it will major changes to the existing system. Once introduced the policing of such a system will be both difficult and expensive.

  3.2  There is a need to change the current system because:

    —  the insurance industry estimates that in excess of one million drivers do not have insurance cover; and

    —  a large number of vehicles are known to be operated without a current road fund licence.

  It is a fair assumption that the vast majority of vehicles being used in these two circumstances are near ELVs. Given that the owners are already flaunting one, if not two, statutes, they are most unlikely to obey a third!

  3.3  It is well known, but difficult to prove, that there is a substantial black economy on the edges of the motor trade where paperwork is at a minimum and all transactions are in cash. A compulsory deregistration system will lead to an expansion of this type of business as, probably, not very affluent or responsible last owners seek to avoid the costs of using an ATF, and less than scrupulous operators seek to assist them. The prospect of large fines for non-compliance will not act as a deterrent unless the prospects of detection and conviction are demonstrably high.

  3.4  The introduction of a compulsory de-registration system is probably not a viable option unless the resources are made available to ensure that the inadequacies of the existing system are properly addressed. A further complication is to have a system in place in time for the implementation of the ELVD in April 2002. This is probably not achievable unless there is some flexibility over implementation.


  4.1  Experience shows that if ELVs have a reasonable value they will be taken to where that value can be realised rather than being dumped illegally with the potential to harm people and the environment. Given the current low value of ELVs and projected markets for reclaimed automotive materials (scrap metals, plastics, rubber, glass) such a value needs to be generated artificially. This could be achieved as follows:

    —  at the point of sale of a new vehicle a sum (eg around £50, but the exact amount would need to be determined properly) should be added to the purchase price and be paid by the vendor into an Automotive Recycling Credit Fund;

    —  when the last owner consigns the vehicle to an ATF a Certificate of Destruction will be issued allowing the last owner to apply for a refund of the recycling credit;

    —  practically many disposers will want to be paid in cash at the point of transfer and so it is probable that the ATF would purchase the vehicle and then issue the COD to itself. Obviously, the AFT would have to ensure that a COD could be legitimately issued as a refusal would mean a loss to the AFT (a simple self-policing mechanism).

  4.2  In principle, the more affluent original purchaser is paying (indeed loaning as the recycling credit will reflect in the vehicle's resale value) a small premium to ensure that the vehicle's last owner, who is likely to be less wealthy, will have an incentive to ensure that the vehicle is disposed of properly and through official channels.


    —  For any system of issuing CODs the proof of identity and ownership would be difficult, but over time an incentive scheme is more likely to encourage better attention to notify change of ownership

    —  it is understood that there are a large number of V5/log books still in circulation, the vehicles to which they relate have long since been disposed of. Obviously, this is a potential for fraudulent claims but SORN and excise license records should indicate whether further investigation may be warranted;

    —  only ATFs would be able to issue CODs but they would also need to be required to ensure that no vehicle once issued with a COD could be moved from the facility as a vehicle;

    —  if only ATFs can trigger the credit repayment then there would be little incentive for the last owners to dispose of their vehicles other than into the system. This would starve fringe operators of their supply by rendering them uncompetitive; and

    —  the suspension of an ATF's ability to issue CODs for breaches of its permit conditions would be a way in which the EA could take swift action against an offending company. The loss of financial incentive would persuade the last owners of ELVs to take their vehicles elsewhere making it a self policing system rather than one requiring enforcement action through the courts.


  6.1  An Automotive Recycling Credit Scheme offers many advantages over a compulsory de-registration scheme and although there are issues surrounding the issuing of Certificates of Destruction these will in the main apply to both systems.

  6.2  A compulsory de-registration system will be necessary to ensure a legal framework for operation. The problems of policing this however would largely disappear if it was combined with an incentive type scheme as proposed.

  6.3  Administration of the recycling credit fund could be a matter for Government, industry, or a combination of both, with the amount of charge or repayment being reviewed at regular intervals to meet the costs involved.

  6.4  This proposal does not take account of processing costs being reimbursed, but it is not inconceivable that the credit could be divided into two elements, ie collection and treatment. Obviously, how the treatment element could be funded is a matter for another paper.

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Prepared 6 December 2001