Warning on conflicts between local authorities under waste trading Bill

The Waste and Emissions Trading Bill passed unscathed through its Committee stage in the House of Lords in December. But Ministers faced criticism that the system of trading in landfill allowances will fail to encourage councils with low recycling rates to improve their act - and may lead to serious conflicts between district and county councils.

Peers debated the Bill's waste management provisions during Committee stage on 17-18 December. For procedural reasons, no amendments were put to the vote, but some will shortly resurface at Report stage.

The Bill's principal purpose is to transpose the EU landfill Directive's requirements to limit the landfilling of biodegradable municipal waste. It will enable the Secretary of State to allocate the EU targets between England, Scotland, Wales and Northern Ireland - and in each territory it gives far-reaching powers for Ministers to establish regimes based on tradable landfill "allowances".

The Welsh Assembly has indicated that it will not allow local authorities in Wales to buy and sell allowances. But Scotland and England are planning a scheme under which councils will be able to trade allowances from Caithness to Kent (ENDS Reports 335, p 39  and 334, pp 36-37 ).

  • District councils: England's split responsibilities on municipal waste management have emerged as a focus of peers' concern. In two-tier areas, county councils will have full responsibility for compliance with their landfill allowances, when in practice much of the work will have to be undertaken by district councils in their role as waste collection authorities.

    The point was pushed home by Lord Hanningfield (Con), leader of Essex County Council. "Unless there is total cooperation between district and county councils the Bill will not work at all," he argued. "One could have the collection authority wanting to thwart the disposal authority for political or other reasons. Therefore the disposal authority could be at fault because of a matter that it could not control."

    He went on: "We have 12 districts in Essex with varying degrees of recycling....Council tax can go up in leaps and bounds because of a very small amount of extra expenditure on attaining high recycling targets....When it comes to it, district councils often will not put up their council tax."

    He suggested that counties might seek judicial review in the event of being held responsible for failing to meet landfill targets. "I cannot see disposal authorities accepting blame when collection authorities have not cooperated or have not been able to cooperate in achieving the targets."

    Lord Greaves (LibDem) also expressed reservations on this point. He proposed an amendment under which the Secretary of State would be able to impose penalties on districts which fail to take action towards the county's landfill targets.

    Responding to these concerns, Environment Minister Lord Whitty insisted that complying with landfill allowances "must be the primary responsibility of the disposal authority." Transferring penalties to districts would provide a set of excuses, he said.

    "Instead we should encourage through other means the partnership between the districts and counties, in order to meet the overall waste strategy objectives," he said.

    Ministers may have a new initiative up their sleeves. Lord Whitty said he would like to see the issue resolved "in a rather wider context of establishing effective duties and responsibilities through partnership between the two tiers of authority" - but he offered no further details beyond pointing to the findings of the Strategy Unit's recent review of waste policy.

    The idea of statutory joint municipal waste strategies - until recently a key element of Government thinking on how to make districts and counties work together - appears to have died a quiet death in England. The Bill paves the way to such strategies in Wales - but their curious absence in England was not even touched on during the Lords debate.

    The Minister did agree to consider one Opposition amendment - to require district councils to maintain records so that the county council has accurate information.

  • Poor performers: Lord Glentoran (Con) expressed wider concerns about the trading scheme. He warned that councils with a poor performance on recycling might simply spend their money on buying landfill allowances from better performers. "Those authorities may not be motivated to invest in their own capital plant but will simply spend money and buy the facilities from others."

    The plans to allow "banking and borrowing" of allowances from year to year may also encourage poor performing councils to delay investments, peers suggested. Lord Dixon-Smith warned of a "danger here that we begin to erode the original purpose of the Bill by including too much flexibility."

    Replying for the Government, Baroness Farrington said that banking and borrowing would help authorities to smooth out the costs of major investments in the pipeline, and help the development of an effective market in allowances. However, she signalled that it may be necessary to set limits on the use of borrowing.

  • Brokers: Lord Whitty confirmed that the use of brokers will be optional. "Local authorities may well find that direct dealing is best," but some may prefer a specialist agent. "If such a profession is created, we [will] seek to regulate it," he said. Brokers would be licensed and subject to regulations.

  • Public access to information: The Bill will enable Ministers to set up public registers of information relating to the scheme. Tory and Liberal Democrat peers expressed concern that the wording would leave Ministers considerable discretion as to whether to release particular pieces of information.

    Responding, Baroness Farrington sought to explain how the power would be used: "We believe that all relevant information should be in the public domain except for sensitive financial details, pricing and trading details, which it is not in the public interest to have in the public domain."

    Less than satisfied with this response, Lord Greaves promised to return to the matter at Report stage.

  • "Excessive" secondary legislation: The Bill caught the eye of the Lords Committee on Delegated Powers in November. It expressed concern over an "excessive delegation" of powers to the Secretary of State, beyond parliamentary scrutiny. "Nearly all the details of the operation of the scheme are left to regulations," it noted.

    The Bill is almost a "skeleton Bill", the Committee said. "It would have been possible, in England and Scotland at least, for these provisions to have been implemented in primary legislation."

    In response, the Environment Department submitted a memorandum justifying the shape of its Bill. The problem is a constitutional one.

    First there is a need to apportion the EU targets between England, Scotland, Wales and Northern Ireland. Next, there is the problem that, while Scotland and Northern Ireland could in theory have introduced their own primary legislation, the Welsh Assembly lacks such powers, making it reliant on a Westminster Bill. Finally, Ministers in both London and Edinburgh were keen to set up consistent schemes that allow cross-border trading.

    The outcome is a very thin Bill which leaves the detail to separate regulations in each of the four jurisdictions.

    The Delegated Powers Committee eventually concluded that the Government's approach was "acceptable" in the light of the constitutional situation. But it felt that there must be opportunity for parliamentary debate on how the powers will be used in England. It also called for the affirmative resolution procedure to be applied to the first regulations relating to the scheme in England. Baroness Farrington agreed to make clear the Government's view on this at Report stage.

  • Narrow reach: A preoccupation of Opposition peers was the Bill's narrow reach. "Why is it simply biodegradable municipal waste where this [trading of allowances] is appropriate?" asked Lord Greaves. "Why is it not appropriate for other areas?" he asked, such as waste electrical goods or scrap cars.

    In a similar vein, Lord Dixon-Smith (Con) asked whether the Bill was, in effect, a pilot for the application of permit trading on a wider basis.

    Lord Whitty replied: "This is a relatively modest and narrow Bill" to fulfil obligations under the landfill Directive. He pointed out that most other waste policy initiatives did not require primary legislation.

    However, Lord Greaves continued with his theme. He proposed an amendment to require the Government to develop a strategy for moving towards "zero waste", and another for a strategy to reduce landfilling of all kinds of waste.

  • Incineration: Lord Greaves also expressed concern that the landfill allowances scheme will bring "greater pressure on waste disposal authorities to go for more incineration, which we would certainly deplore."

    He was supported on this point by the Conservatives. Lord Dixon-Smith said that incinerators "simply convert one form of pollution into another", and that no more plants should be built.

    An amendment to require a Government strategy to reduce the amount of waste going to incineration was roundly rejected by Baroness Farrington. She said that the choice of waste treatment facilities was up to local authorities.

    The Government's aim was to "try to slow down and reverse the growth of waste and recycle as much as we can.... Whether we shall need more incineration in future will crucially depend on the success of these measures," she said.

  • Why 16 July? A technical point raised during the debate was why the landfill allowance years defined under the Bill ran from 16 July. Lord Hanningfield suggested that it would pose difficulties for authorities as the financial year runs from April to April, as do most waste management contracts.

    Lord Whitty insisted that 16 July was a requirement of the Directive - although in fact this is not explicit in the Directive, and it is not at all clear why the targets could not be brought forward by three months to suit UK accounting practices.

    The Minister hinted at a possible way forward. He said it was possible that the scheme could run from July to April, so that "all contractual aspects would relate to a year ending in April."

  • Penalties: Peers pressed the Government on its plans for the penalty regime where local authorities exceed their allowances. One idea put forward by peers was for the revenue to be recycled elsewhere in the municipal waste management pot.

    Lord Whitty hinted that this was being considered by an interdepartmental committee that is following up the proposals of the recent Strategy Unit report. He noted the attraction of keeping money within the waste management system - but said that this may face Treasury opposition.

    The sums levied in penalties may be substantial. "The sanctions must be more expensive that the cost of complying," said Lord Whitty. "One reason that the penalties are not specified in the Bill is that to some extent we shall have to set them in line with the market [for landfill allowances]."

    However, Baroness Farrington said the Government might elect not to impose a penalty "where the landfill allowance is exceeded only by a very small amount and where there are clear plans for improvement."

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