COMMONS

Lower VAT on recycled products and extend consumer warranties

24 July 2014

MPs are calling for lower VAT on recycled products, longer warranty periods for consumer goods and a ban on food waste being sent to landfill, in a new report looking at how the Government could help insulate the UK from rising resource prices by creating a more 'circular economy'.

Environmental Audit Committee Chair, Joan Walley MP, said:

"We had throwaway economics in the past, but that disposable society simply isn’t sustainable in the twenty-first century. Less than half of all the stuff we throw away each year is recycled and turned back into something useful, despite prices for raw materials rising across the world. Global food prices have roughly doubled since the beginning of the century, metal prices have trebled, and energy prices quadrupled. These trends look likely to continue as emerging economies expand and the world population grows to 9 billion by 2050.

Unless we rethink the way we run our economy and do business in a different way, environmental problems like climate change will get worse and the cost of living and doing business in the UK could continue to rise.

The good news is that with the right Government support we can stimulate UK manufacturing, create jobs, grow our GDP and reduce our environmental footprint. We have to create a more circular economy that rewards innovative businesses, values natural capital, and is resilient in the face of rising global resource prices."

There are potentially billions of pounds of benefits for UK businesses in becoming more resource efficient. The Committee heard from leading companies – such as M&S and B&Q - who explained that this makes economic as well as environmental sense. Some are exploring new business models where things can be hired rather than owned or using innovative processes and materials to reduce environmental impacts.

Recycling

Businesses told the inquiry that the vast array of different area-by-area recycling regimes in England is confusing, sub-scale and makes it harder for companies to access valuable materials that could be reused. The variety of different recycling services also means there cannot be consistent on-pack information about a product’s recyclability to help households. The MPs say the Government should give new guidance to local authorities in England to standardise recycling collections to create new economic opportunities, as Wales and Scotland have done. The Environmental Audit Committee also wants the Government to support EU proposals to increase recycling rates to 70% by 2030. It points out that while England has improved its recycling rates since the beginning of the century from 11% to 43%, these have started to plateau, and it still has a considerable way to go to catch up with the best performing countries, like Austria and Germany.

Joan Walley MP added:

"It is possible to get recycling rates to nearly 70% as other European Countries and some UK councils have demonstrated.  There is about 3% to 5% of waste that you cannot avoid landfilling at the moment, but with better product design even that might be eliminated."

Lower VAT on recycled products 

The report recommends that the Government takes steps to reform taxation and producer responsibility regulations to reward companies that design greener products.  Differential VAT rates should be introduced based on the environmental impact or recycled content of products. Tax breaks should also be considered for businesses that repair goods or promote re-use.

Zac Goldsmith MP, Member of the Committee: 

"Unless we learn to live within nature’s means, we are going to hit a wall. We know that because even while the world’s dwindling resources are becoming more and more expensive, our global appetite for resources continues to soar. Designing waste out of the way we live and do business is therefore a defining challenge. What’s clear is that businesses that take this challenge seriously will flourish, and those that don’t will eventually fall behind. But Government has an important role too, and this report highlights some of the steps it needs to take."

Extended warranties and eco-design

The Government should work with the EU to establish eco-design standards across a range of products to make them easier to repair, upgrade, or recycle. Such standards should phase out products made from materials that cannot be recycled and encourage companies to design goods that have a clear end-of-life recovery route and are fabricated using easily separable and recyclable components. The Government should also work with industry sectors to set longer minimum warranty periods for consumer products to encourage businesses to adopt more resource-efficient business models.

Joan Walley MP:

"We all know the frustration when we have to throw something away even though it’s just past its warranty. In our disposable society it often makes more financial sense to buy a new one than get something repaired. Things are not made to last and many manufacturers don’t make it easy for us to fix things. Government should work with companies to incentivise and encourage design that makes it easier to repair products and finally remanufacture or recycle them. Ministers should also work with industry to extend consumer warranties so that companies are encouraged to build things that last."

Food Waste

The Government should also ban councils from sending food waste to landfill. Just 400,000 tonnes of food waste is separately collected for organic recycling in the UK out of the 7.2 million tonnes thrown out by households every year; around 6%. Instead this food waste could be collected separately and composted or used in anaerobic digesters to produce biogas and renewable energy and fertiliser.

Joan Walley MP added:

"Food waste could be used to produce biogas for energy and fertiliser for our farming system yet at the moment too much is thrown into landfill where its value is lost and it produces climate-changing gases like methane."

Government leadership

The MPs found that the Government’s current approach to these issues lacks ambition and leadership. It is characterised by small-scale schemes and although responsibilities are split across a number of departments, there is no strategic plan to achieve systemic change linked to industrial policy. Furthermore, Defra has dramatically cut funding for resource efficiency initiatives. The Committee argue that the Government should learn from the strategic vision that other countries have adopted and embrace the EU’s ambitious targets for improving resource productivity, supporting business in achieving the economic and environmental benefits of a more circular economy.

Joan Walley MP, concluded:

"Reducing the dependency on primary resource use for economic growth is an essential part of moving to a more sustainable and price-shock proof economic system. Some businesses are showing real leadership and innovation to adjust their business models and become more resource efficient. However, the Government must do more to ensure that the right conditions are in place so that many more businesses can shift from a linear approach to a circular one. We heard from business how successful green taxes such as the landfill tax had been in driving change in the waste industry.  We need the same strong tax signals from the Treasury for the Circular Economy"

Background information

The European Commission published a Circular Economy package on 2 July 2014. This proposes that countries should recycle 70% of municipal waste and 80% of packaging waste by 2030. The Package also includes a zero-waste-to-landfill policy for plastics, paper, metals, glass and bio-waste by 2025, as well as initiatives around eco-design. The European Environment Commissioner Janez Potočnik says that the European Commission’s vision was that "by 2030 each country should recycle everything it is possible to recycle".

Latest figures (from 2012) show that recycling rates in Europe are highest in Germany (65 %), followed by Austria (62 %) and Belgium (57%).

Recycling rates by local authorities in England in 2011/12 ranged from 69% (Vale of White Horse District Council) to 14% (Ashford Borough Council). Figures from 12/13 are available, but not broken down by authority.

Other countries have introduced regulatory measures to divert organic waste from landfill, such as the regulations requiring households to separate out food waste in Ireland, or the landfill ban on food waste being introduced in Scotland.

The Environmental Services Association suggest that a more circular economy could increase UK GDP by £3 billion a year. A Government study in 2011 indicated that there were £23 billion of financial benefits from low/no cost improvements available to businesses in the UK. The Green Alliance estimate that introducing more consistent recycling collections could be worth £1.7 billion a year.

Novamont submitted evidence to the Committee which uses data from WRAP to estimate that 400,000 tonnes of food waste was separately collected for organic recycling in the UK in 2012.

Further information

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