Kicking the can

Last Autumn, I wrote about the issues surrounding the Scottish Government’s plans to introduce a Deposit Return Scheme (DRS) for beverage containers, with effect from August this year. It has to be said that some of the comments showed a complete misunderstanding of the nature of the scheme, in particular failing to appreciate that every container would need a specific barcode to confirm it was one on which a deposit had been paid, and not realising that, unlike virtually all similar schemes in other countries, every producer would be required to register and would have their performance monitored in terms of the proportion of containers returned.

Since then, there was a growing chorus of concern from both industry and consumer groups that the scheme as designed would be inflationary, would impose significant extra costs and administrative burdens on businesses, and would severely restrict consumer choice. It also became clear that no attempt had been made to look at how such schemes operated in other countries, and that the Scottish Government had failed to apply for an Internal Market Exemption from the UK Government, which would be needed to put the scheme into operation. Plus it remained unclear how the deposits would be treated for VAT purposes, which is essential for the programming of electronic point-of-sale systems. So it started to look increasingly likely that there would be some further delay in the implementation date.

Then in the middle of February came the unexpected and precipitate resignation of Nicola Sturgeon, which turned out to put a slow-burning match under the whole edifice of the Scottish National Party. All three of the candidates to succeed her said that, to a greater or lesser extent, that they would review the scheme, and earlier his week her eventual successor Humza Yousaf duly announced that the implementation date would be pushed back until 1 March next year. However, the hapless Yousaf now seems to be inhabiting a burning building, with the whole of the SNP having imploded, so it’s anyone’s guess exactly what the situation will be then.

In any case, all that he has done is to kick the can further down road. While the extension does give the opportunity for a review, and allows businesses more time to prepare, nothing has actually changed, and the scheme remains as damaging and impractical as it was before. In the words of a statement from the Night Time Industries Association Scotland (NTIA),

“The NTIA welcomes the news that the Scottish Deposit Return Scheme has been delayed until March 2024, but we need to be clear that the scheme as designed is fundamentally flawed and remains completely unworkable for large parts of our sector. It would also be significantly inflationary and worsen the cost of living pressures being felt across society.

“Scotland’s DRS as currently proposed cannot be fixed by tweaking around the edges, and a total redesign, learning the lessons of schemes elsewhere, is needed. If there is to be a scheme it also must be identical in scope across the UK, launching at the same time UK wide, and it should be much simpler and less expensive to implement.

“We urge Scottish Government to now engage in meaningful consultation with businesses and commission a full review and redesign from scratch of the deposit return scheme.”

So, unless there are significant changes, Scotland will end up in just the same mess in March 2024 as it would have done in August this year. There must be a very severe doubt as to whether that date will be achieved either. If a DRS is to be implemented at all, surely the sensible option would be to shelve the Scotland-only plans and await the UK-wide scheme planned for 2025, which will avoid the creation of any internal trade barriers.

It also has to be questioned whether such a scheme is worthwhile in the first place. Unlike most other countries that have introduced a DRS, the UK already has an effective system of kerbside collections which handles the majority of beverage containers. Recycling is not worth doing regardless of cost and, in a report produced by the Institute of Economic Affairs, they point out that it does not make economic sense even when intangible benefits are taken into account:

A UK-wide deposit return scheme (DRS) can be expected to increase recycling rates for beverage bottles and cans from 70-75 per cent to 85-90 per cent, but at a disproportionate cost.

A DRS is expected to cost over £1 billion in its first year and £814 million per annum thereafter. The tangible economic benefits are expected to be less than £100 million per year. In financial terms, a DRS would be highly inefficient, largely because kerbside collection already recovers 72 per cent of these containers.

The government’s impact assessment is only able to claim a net economic gain by including intangible benefits of £968 million per annum from a reduction in litter. This figure is highly questionable. The impact assessment neglects to include the much larger costs of unpaid labour that will be incurred by households having to collect, store and return empty containers. When the full costs and benefits are included in the analysis, there seems to be no economic case for a deposit return scheme.

There also remain significant questions around the sheer practicalities of how the scheme is expected to work. The sheer volume of containers involved is enormous. I haven’t been able to find a figure for the average number people use, but if we assume it’s two per person per day, that means a two-person household will generate well over a hundred per month. People are supposedly going to use “reverse vending machines” that will give you a credit for each container but, given that they’re going to have to check the barcode on every one, they’re not exactly going to the lightning-quick. How many of these will be needed to avoid massive queues? Is there enough supply to achieve this from the start? Where will they be located, and who will be responsible for operating them? Has there even been a demonstration of one in a UK context?

Another issue is how the repayments will actually be made. In some other counties the machines issue supermarket vouchers, but I can’t see most people being happy with that. They’ll want actual money. And, while it may be possible to create a system where people create an account that sends the repayments directly to their bank, that’s not going to cover everyone and will create a barrier to claiming refunds. A foreign student who buys a can of Coke in the street is going to want actual cash, so are we going to have machines dotted around the streets containing large sums and potentially presenting a target for thieves?

As I said in my previous post, given that we already have an extensive system of kerbside collection that in general works fairly well, surely it would make sense to build on this for the majority of containers that are consumed at home, rather than making people use something entirely different. Effectively all such containers that I buy go in the recycling already, so personally I would gain nothing apart from more hassle. I, and I’d guess millions of others, would happily get a private company or charity to collect the containers from the my home and take a commission for doing so.

At the same time, the Scottish Government announced that they were withdrawing their proposals for draconian curbs on alcohol advertising and promotion and would review them. I have to say I didn’t get too worked up about these, as they always seemed too extreme to be actually implemented. Such ideas always show a failure to appreciate how advertising actually works. They would have done little or nothing to address problem drinking and would have disadvantaged small producers and new entrants to the market in favour of the big established players. The main motivation seemed to be to express a distaste for alcohol in general. And to demonise the industry that is your biggest export earner is a spectacular example of shooting yourself in the foot.