Revealed: UK government was warned of potential trade issues with Scottish bottle recycling scheme in 2021

EXCLUSIVE: With the UK government expected to block Scotland’s landmark deposit return scheme (DRS) due to concerns it could create an “unlawful” trade barrier, ENDS can now reveal that ministers were warned that this was a potential issue almost two years ago.

Plastic bottles. Source - GettyImages, Andrew Fox

Last month, it was reported that a legal opinion prepared on behalf of “a group of distillers” had warned that the Scottish DRS “could create an unlawful trade barrier with the rest of the UK”, in contravention of the 2020 UK Internal Market Act (IMA). 

The Internal Market Act was passed by the UK Parliament at the end of 2020, without the consent of the Scottish Parliament. 

Devolved governments can apply for policies to be exempted from these rules, however according to media reports, Alister Jack, the Scotland secretary, is urging cabinet colleagues to block any request for the DRS to be exempt. 

Jack has openly criticised the Scottish scheme as being badly designed and inflationary, telling the Commons recently that it would be bad for businesses and consumers. He warned that the price of a 12-pack of Scottish water sold at Aldi would rise from £1.59 to £3.99.

ENDS can now reveal that the government was forewarned of these potential trade issues almost two years ago. 

According to responses to the UK government’s consultation on its own deposit return scheme, which closed in June 2021, Tesco, CocaCola, PepsiCo and McDonalds all warned that a disjointed DRS could create serious issues for both consumers and businesses. The consultation responses were obtained following Freedom of Information requests by ENDS.

PepsiCo warned that “different schemes would drive pricing differences between the same product”, which it said would “incentivise the transportation of products and used packaging between deposit and non-deposit parts of the UK (and the Republic of Ireland) to take advantage of this”. 

Tesco said a “single market approach must be the aim” and warned that there are “significant issues and challenges for both businesses and consumers if there is not a consistent approach to DRS across the four nations”. 

CocaCola told the government that a “fragmented system design will lead to multiple SKUs [stock keeping units] for the same product and increase our costs, potentially meaning the impact of a DRS will be extremely ineffective, and unmanageable.”

And McDonalds warned of “logistical issues” if the scheme was not aligned across the whole of the UK and “urge[d]” the government to align its targets across the four nations. 

The Scottish government has also told ENDS that it first raised the need for an exclusion in July 2021 and said it has “followed the process that was agreed between the UK and the devolved governments”.

Steve Hynd, policy manager at City to Sea, an environmental organisation campaigning to stop plastic pollution at source, told ENDS that these FOI’s show “that big business and big plastic producers were warning the government of the importance of an all in DRS that covered all of the UK. 

“Through inactivity and sitting on their hands the British government has potentially put at risk one of the most important environmental policies of a decade, Scotland is right to be pushing on with their own DRS in the face of incompetent Westminster politicians. Now more than ever we need England, Wales and Northern Ireland to match the level ambition shown by Scottish Parliament, not for Westminster to drag devolved nations to the lowest environmental standards” 

In the FOI requests, the companies also warned that there is a risk of fraud if there is not a joined-up approach across the UK. 

“At present we can produce a product in England, and it can be placed on the market in Scotland or Wales (and vice-versa). If there is a DRS in one territory, or varying DRSs across the nation, this product will need to be produced specific to the market it is being placed on, in order to mitigate against fraud, which causes great complexity,” wrote CocaCola. 

“For example, assuming a deposit level of 20p, a lorry load of 330ml cans has a deposit value of £15,000. An aligned approach across various schemes can mitigate the risk of fraud.”

PepsiCo also warned that there was a risk if there are “different, misaligned schemes implemented in different parts of the UK at different times”.  

“Governments across the UK should ensure that any DRS introduced is compatible and interoperable with the system planning for Scotland, which is “all-in” - and moreover, work towards a single GB-wide scheme in the future that is efficient, simple and works for consumers, producers and retailers alike,” it wrote.  

A UK Government spokesperson said: “The UK Government's preference would be for a UK-wide DRS as the best way to maximise environmental benefits, minimise disruption to the drinks industry and ensure choice for consumers.

“We are developing our DRS in collaboration with the Welsh Government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, and a separate scheme is being delivered in Scotland. We are working with the Scottish Government to ensure as much interoperability as possible between the schemes when they launch across the UK.”