I beg to move,
That the draft Producer Responsibility Obligations (Packaging Waste) Regulations 1997, which were laid before this House on 29th January, be approved.
I must first apologise that the Secretary of State is not present, but, as I am sure hon. Members are aware, the Environment Council is meeting in Brussels today and tomorrow. However, his absence gives me the opportunity to speak on the subject. As I chaired the Environment Committee's inquiry into recycling, it is a real pleasure to be associated with an issue that has been a matter not only of controversy but of considerable fascination for entire industries and for many pressure groups.
I should start by putting the regulations in context. We need to obtain better value from our waste, in the interests of the environment, of United Kingdom competitiveness and of the consumer. That is the central objective of the Government's waste strategy. Our strategy, however, is particularly relevant to packaging waste.
Each year, we create 8 million tonnes of packaging waste, and—although it is the largest recyclable element in each of our dustbins—about 2 to 3 million tonnes of it goes to landfill. That practice is simply not sustainable. We cannot continue to divert ever more of our countryside to providing more landfill capacity. Landfill generates methane, which is a major contributor to global warming. Moreover, I think that all hon. Members know that the process of finding and planning new landfill sites is extremely difficult. I am particularly aware of that difficulty, because it is covered by one of my ministerial responsibilities.
Above all, it is important to harness the long-term economic benefits available from treating waste as a secondary raw material rather than simply as a costly liability. Therefore, the system that we are proposing has two principal objectives. The first is to implement the Government's challenge on producer responsibility for packaging waste. The second objective is to enable the United Kingdom to implement recycling and recovery targets in the European Community directive on packaging and packaging waste.
The producer responsibility challenge is about using the market to deliver an environmental objective, and requires that the price that the consumer pays should reflect a contribution to the costs of dealing with a product as waste. Producers have obligations to recycle and recover waste in proportion to the number of goods that they place on the market. In packaging, that obligation would create an incentive, first, to minimise the amount of packaging needed for the purpose; secondly, to ensure that one reuses packaging whenever possible; and, thirdly, to find more efficient and cost-effective methods of recycling and recovery—for example, by finding new markets for recyclate.
Broadly, by 2001, we are aiming to double the amount of packaging waste—paper, glass, plastic, steel and aluminium—that we recycle or recover. We are currently achieving about 30 per cent. recovery of packaging, and we need to increase that to 50 per cent.—the minimum target set by the EC directive. As the United Kingdom has relatively little waste-to-energy capacity, we expect most of the recovery to occur through materials recycling.
Our initiative will bring real benefits to local communities, local authorities, voluntary bodies and everyone concerned with recycling. By 2000, we aim to have convenient and close-to-home recycling facilities for eight out of 10 households—in some cases through new kerbside schemes, and elsewhere through a big expansion in bank systems. The principal means of achieving that goal will be through collective business schemes, of which the prototype—Valpak—is well advanced. Valpak reflects a substantial commitment by more than 100 leading businesses which have subscribed to its start-up costs.
Is not there a concern in the industry—which the Minister must have heard expressed very loudly in the past couple of months—that Valpak is okay, but that it is not yet up and running properly? It seems that some of the key players, especially those in the retail sector, are already leaving the Valpak framework, thereby threatening it. Unless those retailers can be persuaded to come back into the scheme and to support it strongly, it will not be possible to secure the objectives desired by the Minister, by myself and by everyone who is interested in the subject.
I understand what the hon. Gentleman is saying; it is important to keep the retailers on board. There is every incentive for them to stay on board, because they could not deliver their part of the recycling targets on their own. They have to work co-operatively with someone. In view of the administrative overheads and the need to have the system up and running, it makes much more sense for them to stay in the Valpak framework, or whatever alternatives come forward, rather than to try to go it alone.
I have no doubt that the Minister has received correspondence from the Paper Federation. One thousand jobs in my constituency are wrapped up in the industry. The federation says that although it supports the scheme and wants it to work, it is worried that if things go wrong, there will not be an adequate review procedure. The federation says that it cannot necessarily wait two years if employment in the industry generally is being threatened. Can the Minister say something today that is helpful to the industry and which reassures it that the Government, of whatever persuasion—obviously my own people have views on these matters as well—will keep an eye on the industry and on employment within it, to ensure that the scheme is working properly and is not damaging areas of it?
This is pioneering legislation, as no doubt the hon. Gentleman and the industry recognise. It is extremely important, therefore, that we keep the matter under close review and if necessary, make alterations. That is why the review process, about which I shall say something later, is part of the overall package. The hon. Gentleman talks about a period of' two years. He should remember that we are talking about 1998 and that we are already almost three months into 1997. Bearing it in mind that 1997 is the year for the collection of statistics and notification, the review of the operation will occur early on. That is a reflection of the fact that we know that we are breaking new ground.
Will the Minister, on the central point of this debate, address himself to the key issue? Contrary to the agreement that seemed to have been reached on 15 December 1995, the regulations will permit retailers to use transit packaging arising in their own back yard, to meet their obligations. That will increase the pressure on other packaging industries upstream and will undermine the viability of Valpak. How does the Minister justify that?
The hon. Gentleman must have missed what I said about retailers a moment ago. Retailers cannot fulfil their obligations simply from their own back yard packaging. They do not have packaging arising in all the categories that we are talking about, so they could not meet all the targets. The hon. Gentleman said that that was the key point of the debate, but I believe that there are a number of key points. If I can make a little progress, I shall highlight them. I believe that one of the main points of the debate is to ensure that we do not go down the road that some other countries have traveled—particularly the Germans—of creating a monster that is environmentally damaging as well as extremely costly.
I was talking about Valpak. Perhaps I should also tell the House that there is a second scheme, aimed at the dairy industry, called Difpak, whose members have recently announced their intention to proceed. Such schemes are run entirely by business. Any business that joins an approved collective scheme is entirely exempt from the regulations, as long as the scheme achieves the aggregate recycling and recovery obligations of its members. I hope that the House agrees that that is a substantial encouragement to join a business—run scheme.
The regulations impose three main obligations. First, there is a registration obligation: businesses must register with one of the environment agencies and must provide packaging data by 31 August 1997 at the latest. In other words, they must choose whether to carry out their obligations individually or to join a collective scheme. Secondly, from 1998 onwards, there is a recovery and recycling obligation. Businesses must take reasonable steps to recover and recycle specific tonnages of packaging waste, which are calculated to take account of the amount of packaging flowing through, the function that they perform in relation to the packaging—that means, for example, whether they convert packaging or fill packaging—and the UK targets, which are 52 per cent. recovery and 16 per cent. recycling for each material by 2001.
Some small companies are concerned about whether they might be discriminated against if they do not join one of the major schemes. Will my hon. Friend confirm that there will be no difference of approach in regard to individual companies that seek to register on their own and those that choose to do it together?
That is true—the smallest companies are exempt from the regulations, although the slightly larger ones will be caught as the phasing comes in. I can confirm that if people want to go it alone and create their own scheme to recover their packaging, they will be free to do so, provided that they do it effectively. If the business is in a scheme, the scheme carries out the tasks.
Thirdly, there is a certifying obligation. Businesses and schemes must certify annually that they have recovered and recycled the required tonnages of packaging waste.
The Environment Agency, in England and Wales, and the Scottish Environment Protection Agency will monitor compliance with the regulations and will have enforcement powers comparable with those that they exercise in relation to their other responsibilities. Businesses following the individual route will need to pay a registration fee to the appropriate agency of £750, while schemes will pay a fee in relation to their membership.
The primary purpose of the regulatory regime is to discourage free riders. Industry told us clearly that that was a basic requirement if the initiative was to succeed. It is therefore important that the enforcement role of the agencies is credible and effective. Much of the agencies' effort will be devoted to education, promotion and assisting industry, but enforcement will be necessary. A public register of businesses and schemes will list all those who have registered and who have self-certified performance of their obligation.
The agencies will also have an important role in relation to data—aggregating information from businesses, to provide a more accurate national picture of how and where the 8 million tonnes of packaging is created. That role also responds to an important industry request for much better data, which are essential to ensure a fair distribution of obligation, as well as to ensure that the United Kingdom is on course to achieve its targets.
I now refer to small businesses. While we have accepted the industry's request for a shared approach, many people have also accepted that it is neither efficient nor profitable to place an obligation on every business, such as the 200,000 or so small shops. The regulations therefore apply initially only to businesses with a turnover of more than £5 million. We estimate that 4,000 businesses with a key role in the packaging chain will be affected. In the year 2000, the threshold will drop to a turnover of £1 million, and we estimate that 9,000 businesses will be affected, including wholesalers who, from that year, will pick up the selling obligation of the small shopkeeper. We believe that large and medium-sized businesses are best placed to ensure that the system is up and running as smoothly as possible.
One of the key features of our approach is that it is based on recycling and reprocessing, not simply collection. If we briefly consider what has happened in Germany, the advantages of our approach become clear. The German householder has five separate dustbins; each German household is served not only by the municipal collection lorry, but by a separate lorry run by the Duales System Deutschland—DSD. The two are not co-ordinated, and there are extremely high targets for recycling and recovery.
The consequences are well known: in its early years, the German system was collecting vast quantities of waste, for which it has struggled to find a use. Today, there is still a significant trade in exporting plastic waste, often with a dowry, to third-world countries, where reprocessing is a euphemism for environmental degradation. The current cost of the German approach is £1.7 billion per annum—an approach that we have wholeheartedly rejected.
When the Select Committee, under my chairmanship, published its report on recycling in 1994, we drew particular attention to the issue. I hope that the House will forgive me if I quote from the press notice that launched our report:
On the subject of recycling targets, we recommend that the aim of local authorities and other bodies should not just be the collection of recycled material. Collection should be viewed as the first stage of the recycling process; it is equally important to develop market demand and adequate processing capacity. We believe that this should be taken into account by the Department of the Environment and the European Union in the formulation of policy, in order to avoid the surplus of collected material as resulted from the German DSD scheme.
By contrast, we have taken great pains to build our approach on the views of business, and we have harnessed the expertise of those with practical knowledge of the industries involved. That is the basis for the regulations. By allowing for business choice, they provide the stimulus of competition. By providing for business self-assessment and self-certification, they offer a deregulatory approach to monitoring and compliance. By providing for exemption for an approved business compliance scheme, they encourage business to develop cross-sectoral co-operation, efficiency and incentives. By focusing on the reprocessing end of the cycle, they ensure that we do not collect material that cannot be used and that the full range of businesses involved have an incentive to find new markets for recyclate.
I and most people who know anything about the subject would agree with the Minister about not wanting to go down the German track, because we do not want that sort of bureaucracy, but at least in all the other systems that I have seen, there is a regulator who conducts audits and checks that the recycling is being done. Is the Minister sure that the Environment Agency has the capacity and the ability to check, audit and control?
I have every confidence in the Environment Agency, which does a good job in respect of all its responsibilities. I have never heard anybody suggest that the agency is incompetent in this respect. I am interested in the hon. Gentleman's comment about not wanting to go down the German route—that contrasts with the remarks of the hon. Member for Oldham, West (Mr. Meacher) who, when speaking to the Environmental Services Association not long ago, praised the way in which the Germans operate.
That is a complete falsehood—I have never said that this country should adopt the German method. It is far more expensive per capita, I have never supported it and the hon. Gentleman should withdraw—
We always welcome conversions on the road to Damascus.
For all those reasons, we believe that the costs of the UK approach will be substantially below those of any of our major competitors. We estimate that by 2001, if collective business schemes are successful, annual costs will be at the low end of the range set out in the cost compliance assessment—that is, around £270 million. Furthermore, we believe that those costs should be viewed essentially as transitional costs, necessary to provide improved recycling infrastructure which, as it becomes available, will be readily deployed by industry. Rising landfill costs and greater use of secondary raw materials, with their long-term advantages to the UK economy, mean that, in the long run, costs will fall. A sustainable approach to packaging waste is, in competitiveness terms, a real plus.
Even putting to one side the UK's policy in that respect, I remind hon. Members that doing nothing is not an option. This is an issue of grave concern to UK packaging manufacturers and exporters seeking to trade with member states that have adopted barriers to trade under the guise of environmental protection. It was for that reason that many in the industry pressed us to negotiate a directive that provided a clear single market framework for the free circulation of packaging, while ensuring that each member state met certain minimum recycling and recovery objectives.
We are now using the directive to safeguard UK interests. We and others have formally challenged the Danish can ban, which restricts the sale of beverages to refillable containers—for a local brewery based in Copenhagen, that requirement is easy to meet, but it is a substantial barrier to any UK exporter. We are urgently considering the latest German proposals on refillable containers, which raise similar issues. The notification procedure that the directive requires gives us a real opportunity to challenge such barriers to trade, and it is encouraging that several member states have already withdrawn or modified their proposals as a result of that procedure, or in anticipation of it. However, for the directive to work effectively, we must be confident that we in the UK can achieve the recycling and recovery targets that it sets.
The regulations now before the House are, as I said, based on a number of principles established in negotiation with industry, starting with the producer responsibility group and continuing with other bodies. There are few trade associations with a substantial interest in packaging that have not played a part in putting together that approach. Even more important, many business leaders have given up substantial management time to develop proposals that will make this a success.
Businesses as diverse as Procter and Gamble, Courtaulds, David S. Smith, Tesco, British Glass, British Polythene Industries, Marks and Spencer, Guinness, Coca-Cola and Carnaud Metal Box have given substantial management time and effort. The business leaders who are members of the advisory committee are continuing to help devise solutions to the difficult issues that we have encountered.
Inevitably with such a process, rapid progress was made early on in agreeing the broad approach, but there has been difficulty in the detail and in finding a solution to issues where sectoral interests differ. In that context, I pay special tribute to Sir Peter Parker who, as president of the Industry Council for Packaging and the Environment, chaired a critical meeting on 15 December 1995, which agreed a formula for the shared obligation and the principles on which the current regulations are based.
However, in a process that involves so many sectors of business, it would be wrong not to acknowledge that there are issues of importance to specific sectors, which remain outstanding concerns. As with any new system, there are fears of the future. Will there be adequate recycling capacity? Will some businesses have to pay much more than others to obtain waste for recycling? Will the ones that hold waste co-operate, or do we need a separate waste holder obligation?
I entirely agree that it is an important process and that we are still in the early stages, dealing with global and strategic issues, but I have a direct constituency interest—250 jobs hanging, if I may put it that way, on coat-hangers and the production thereof. Can the Minister say yet whether, as in other European countries, fabricated plastic coat-hangers will be exempt from that process, at least at this stage?
The regulations do not lay down that degree of detail. They are broad definitions, and it will be for industry, working with the Environment Agency, to ensure that what happens in practice reflects the spirit of the measures that we are placing before the House. I can give the hon. Gentleman what I regard as a commonsense view on that, but I would not necessarily regard it as a definitive view, because plastic coat-hangers can exist for any of several different purposes. They might be sold and therefore be ordinary products, or they might be given away free with dry cleaning or be included with the suit or shirt that one buys in a shop, in which case they are packaging, as cardboard stiffening, pins and so on would be.
As I said, it will be important to answer several questions. One of those is: will all the parties play an equitable part in accessing waste from the domestic waste stream? Another might be: do the activity percentages in the regulations fairly reflect what each part of the packaging chain actually does?
Many of those concerns can be answered only when there are better data and when the system has begun to function. I assure the House that we shall keep a careful watch on the way in which the regulations work in practice and will keep them under careful review, to ensure that nonsenses do not occur. The staged build-up to the directive targets should ensure that no one's burden is unreasonable in the early years. I know that there are some fears, but I hope to reassure hon. Members that some of them are unreasonable.
Does the Minister envisage a conflict with the advisory council or within the industry? He mentioned shared responsibility, but he also mentioned the market. It is difficult to see how we can have shared responsibility in a market scenario. Is the Minister aware of any anomalies or problems in such a situation?
I believe that, in the various parts of the chain, the shares have been sorted out very much along
market lines. If, subsequently, it turns out that those shares are different, or if technology brings a different perspective to our debates on the matter, that too may change. I have learnt in politics the essential truth of the philosopher's question, that only one statement is true at all times and in all places
And this too shall change.
Nothing is set in stone; nor should it be.
It is important to reassure those who have expressed some of the more unreasonable fears. One of them relates to the relative size of the retailer obligation, and to whether retailers will be able to meet their obligations from their own waste. Let us consider a large household name retailer. The obligation laid down by the regulations for such a business is likely to be for between 100,000 and 200,000 tonnes—in other words, between 3 and 5 per cent. of the entire United Kingdom recycling and recovery obligation will have to be met by that one business. It will have access to waste in its own back yard, but that source is unlikely to supply much more than half its needs. It will have very little of some of the materials that it needs, such as glass, aluminium and steel. In short, the largest players in the retail and pack filler sectors have large obligations, and will have no alternative but to co-operate with others, either in a scheme or in some other way, to satisfy the obligation.
As I said, ensuring that the regulations generate a successful UK initiative on packaging waste will be a process of dialogue for the Government, the agencies and business. There will inevitably be issues that need to be reassessed in the light of experience. That is why the Government have given a clear commitment to supporting the work of the advisory committee in carrying out a thorough review of the system once it is in operation, and to considering any recommendations that it makes. The work load of the committee for the review is already being mapped out. We are happy that it should look at issues of perceived inequity, such as the situation in the construction industry, and the proposal that all business users of packaging should be required to sort and separate waste.
For their part, the Government have pledged to keep under review the need for the regulations. As the amount of recycling increases, I have no doubt that we shall be able seriously to consider reducing their scope. Many businesses have written to me on this point, and I am certain that, whatever their concerns, given all that we have discussed and negotiated, the overwhelming majority of UK businesses want to adopt the regulations now. That message has also emerged from what has been said here today.
I also have no doubt that if success is to be achieved, it will come only by working with the market and with the businesses that are most closely involved. As the Secretary of State has said, the market is the only force powerful enough to deliver the objective of sustainable development. I therefore have no hesitation in asking the House to approve the regulations.
I wish to make it clear immediately that the Opposition—soon, no doubt, to be the Government, if Wirral, South is anything to go by—strongly support the principle of increased recovery and recycling of packaging waste. However, the issue has been handled by the Secretary of State in a manner that can only be described as shambolic.
At the outset, the right hon. Gentleman failed to take control of the issue and tried to hive off all responsibility to the industry. Given the diversity of business interests involved, that led, not surprisingly, to protracted wrangling and uncertainty. Then the right hon. Gentleman tried to reconcile the differences at the notorious meeting of 15 December 1995. If the Minister thinks that agreement was reached then, I have to tell him that there is still a great deal of disagreement about what is supposed to have been agreed on that occasion. Even after that, the calculation and assignment of legal obligation remains extremely complex and an unnecessary burden on business. Contrary to what the Minister said just now, we cannot even be sure that the terms of the European directive can be met.
The regulations that are now finally being introduced are more than eight months late, beyond the European Union deadline, following repeated delays. The statutory guidance that is so essential to the technical implementation of the scheme has still not been produced. The whole handling of the regulations has been a masterpiece of muddle, mismanagement and market excesses.
The fundamental flaw, as many in the industry have said, is that the principle of shared responsibility, which the Government purport to endorse, is incompatible with the free operation of market forces, which the Minister ended his speech by praising and which the Government certainly encourage.
At the 15 December meeting, it was clearly accepted and laid down that the share of the legal obligation attributed to each sector would correspond roughly to the share of the overall cost of recovery and recycling that each sector would bear. That key principle breaks down if those who have substantial obligations for packaging supplied to domestic consumers—that is, the retailers—can discharge a large part of their obligation by recovering and recycling commercial and industrial waste supplied to them by UK packers and fillers for which they have no producer responsibility obligations.
It would be wrong to say—I am not saying it, contrary to the Minister's assertion—that retailers can evade all their obligations in this way. I readily accept that retailers have the largest obligation, at 47 per cent., but it is a reasonable estimate—confirmed to me by the industry—that retailers can discharge as much as two thirds of their obligation by this means. Thus, they will be able to limit their share in the cost of the obligation to recover and recycle used packaging from the household waste stream to about 15 per cent. of the total. It is difficult to see how that can be a fair allocation of "shared" responsibility. It is in clear defiance of the third principle of the 15 December agreement, which is:
Each sector must play an equitable part in relation to the domestic waste stream".
Moreover, that produces a series of other distortions elsewhere in the packaging chain. It will put many companies, particularly small and medium ones, at a serious competitive disadvantage—to answer an earlier Conservative intervention. They produce or supply the
transit packaging, but because they are prevented from gaining access to it, they will have to discharge their obligations by recovering other, more expensive, material. Figures shown to me suggest that the wholesaler could face a cost of compliance of up to two and a half times as much as his retailer with an equivalent turnover.
For the same reasons, the regulations will make it less likely that packaging chain members with large quantities of non-obligated transit packaging will join in a collective or shared approach. That will undermine the viability of Valpak. Some major retailers, Tesco for one, have already made it clear that they will not participate. That will burden multi-material collective schemes, which are supposed to be the Government's preferred approach, with more difficult-to-recover materials and thus increase the cost of achieving compliance for their members. That in turn will generate a large cross-material subsidy between paper and other materials; some have estimated that it could amount to as much as £45 million a year. That will seriously disadvantage the paper industry.
It is surely evident that what is wrong with the regulations is the fact that the Secretary of State wanted to have his cake and eat it. He wanted, for reasons of party dogma, to leave it all to industry to decide and to wash his hands of any direct involvement or display of leadership.
We have made it abundantly clear that we want to work with industry to ensure that it evolves a scheme of which it feels it has ownership. We do not want to go down the German road. I know that the hon. Gentleman is about the only person left on the Labour Front Bench who openly believes in a command and control economy, but that is not how we want to proceed. That is why we have worked with industry to come up with a decent set of regulations, for which it has a sense of ownership. I know that the hon. Gentleman is an enthusiast for the German system, but it has been disastrous.
The hon. Gentleman has such a taste for projecting his prejudices and insults that he simply does not listen to the facts. He should not say what I have already clearly refuted. I repeat that I have never supported the German scheme.
That in no way suggests that we accept the German scheme. The scheme that the Secretary of State has introduced is to be repudiated because it leaves the problem entirely to industry to resolve, with companies quarrelling among themselves endlessly, failing to resolve the problems or to display any leadership. He should have introduced a sensible regulatory regime that listens to industry but in which the Government then make up their mind in the light of their consultation with industry. That is certainly how we would proceed.
When the shared responsibility approach was finally decided on—it is unique to the UK and has resulted in a complex and previously untried set of legal arrangements and obligations—the Secretary of State went along with it. When that approach was then distorted by the exercise of market powers by certain sections of the industry, he tamely assented to it. That is why this whole exercise is now in such a mess. It is all due to the right hon. Gentleman's abdication of responsibility and chronic lack of leadership.
In two months' time, the Government will be swept away. They may be swept away by a landslide, but they will certainly be swept away. In view of the mess created by the regulations, I want to make it clear that things cannot simply be left as they are or merely referred to the Advisory Committee on Packaging for consideration during the two-year review. That would not be sufficient. If we were to do that, we would entrench cherry-picking, undermine Valpak and other multi-sector schemes, and weaken the shared approach. It would also make it almost impossible for many obligated companies to use the individual compliance route. The Government have insisted that that route be kept open so that the field is not tilted in favour of exemption schemes, but unless something is done, individual compliers will find it almost impossible to obtain the necessary reprocessing certificates, except at prohibitive prices.
Another difficulty if things are allowed to remain as they are under the regulations is that there is no plan to ensure that the necessary collection, storing and reprocessing capacity is available to meet higher targets in future years. That problem has now been made more acute by the standstill over the past year while industry waited to see exactly what obligations the Secretary of State would impose and by his recent increase in exemptions to the £5 million turnover threshold. The effect will be a huge increase in the need for reprocessing capacity in a few years' time, which will not be met in advance by market forces.
Basically, we now need a mechanism to ensure that obligated companies, whether individual compliers or companies in exemption schemes, are matched with reprocessers producing recycling certificates. We need a requirement that only such certificates are acceptable evidence of compliance, and that such certificates will be issued only for a company's obligation tonnage in each material for which it has an obligation. The objective of the proposals would be to prevent expensive cross-material subsidy and to prevent small and medium companies being put at a competitive disadvantage by restricting access to their own waste products. The purpose would simply be to restore the pre-eminence of the shared approach principle, in which the Government claim to believe but which they have done nothing to prevent being undermined. It would also strengthen the position of Valpak as a multi-sector scheme, which we should like to consolidate.
I therefore give notice that an incoming Labour Government will seek an early review of the regulations to find the best means of securing those objectives.
That is very much in line with the proposals set out in early-day motion 299, which has now been signed by more than 95 hon. Members from both sides of the House.
I appreciate that that is only an interim solution and that longer-term solutions must await a more thorough review by the advisory committee or an equivalent body. Several such longer-term questions need to be asked. First, is waste minimisation being sufficiently encouraged? That is not directly addressed in the regulations, except in the sense that less packaging means less obligation. Secondly, would it be sensible to have a split target—one that maximises recovery of commercial and industrial waste, which is relatively clean and easy to collect—and then add to that a separate domestic stream target? Thirdly, do the regulations sufficiently encourage re-use or positively discourage it?
There are other concerns, too. Hon. Members will know that local authorities have made forceful complaints. They are disturbed that they will be placed in a subordinate position to the private sector, especially where retailers set up rival schemes. The local authority recycling advisory committee has let it be known that retailers will threaten existing recycling infrastructures if they take control of car park schemes and reduce the viability of local collection rounds.
Despite all those substantial reservations about the regulations, I repeat that the Opposition strongly support the general principle of increasing recovery and recycling of packaging waste. Indeed, one might argue that the regulations do not go far enough. Under the regulations, Britain aims to recycle only fractionally over a quarter of our packaging—virtually the minimum allowed under the EU directive. By contrast, Germany—if I dare to quote a more successful country, without necessarily supporting the mechanism that it uses—already recycles more than three quarters, and the Netherlands recycles half.
Furthermore, we need to set targets to reduce packaging. Over the past year, packaging in Germany has decreased by 12 per cent. while in this country, INCPEN, the Industry Council for Packaging and the Environment, predicted a 4 per cent. increase in food packaging between 1993 and 2000. Despite all our reservations, we do not want further delays in view of the short time scales within which the recovery and recycling targets must be met. Further delays would only increase uncertainty in the industry and further undermine Valpak's viability. We are therefore content to allow the regulations through, but on the strict understanding that they will require urgent review along the lines that I have made clear.
That was a rather muddled speech from the hon. Member for Oldham, West (Mr. Meacher). He was on strong ground when he expressed the valid concerns widely held outside the House about the possible advantages to the retail sector, but he spoilt his speech with his extraordinary and excessive abuse of the Secretary of State, and his failure to understand that the scheme has the great advantage—there are disadvantages, which I shall deal with—of having been developed in co-operation between Government and industry.
By expressing criticism, the hon. Gentleman was criticising those many people to whom he also paid tribute. He went on to promise a review, which we all welcome, but the Minister said that there would be a continuous process of review, even before the implementation of the regulations. There are strong points to be made, but the hon. Gentleman was rather muddled, and spoilt the strength of his case.
I am sorry that the debate is to be so short, as it is of enormous importance. I shall try to be brief. The paper mills in my constituency recycle about 1 million tonnes of paper a year, and there is a steel mill that recycles 1 million tonnes of scrap metal every year, so I can claim that we are in the forefront of UK recycling.
Years ago, as many hon. Members who had paper mills in their constituency knew, the paper industry was in decline. In recent years it has become a growth industry. That is because, previously, the industry was entirely dependent on imported raw materials—pulp. Now there has been massive new investment. More than £500 million has been invested in north Kent alone, protecting thousands of jobs and worth billions of pounds to UK Ltd. in terms of import saving. All that has happened because now we have our own indigenous raw material—recycled paper. There has been an industrial revolution, and it is quite an exciting story. It is estimated that the paper industry wants another 2 million tonnes a year to support further investment.
As well as that strong constituency interest, I must declare my interest as parliamentary adviser to the Paper Federation of Great Britain. I am also one of those who believe passionately in the need for the UK to achieve maximum recycling of waste materials—paper and board, glass, metal and plastics—as raw materials for further industrial production. By that I do not mean incineration in large-scale, expensive, subsidised waste-to-energy power stations.
With that belief I, like almost everyone else, warmly welcome the aim of the measure. It might therefore sound churlish to use this occasion to express serious concerns about the regulations. We have been told that we currently recover just over 2 million tonnes out of 8 million tonnes of packaging waste. The target is to raise that to almost 4 million tonnes in about three years. That is an ambitious target. We must find a way of using an additional 2 million tonnes of recycled waste materials. I agree entirely with my hon. Friend the Minister and with the hon. Member for Oldham, West that we had to avoid the system adopted by the Germans and the massive disruption caused to the market by the green point system. We had to avoid such a radical and sudden change in the system.
It was right to welcome the principles on which the Government embarked—to work with industry to develop a scheme for shared responsibility among all parts of the packaging chain. There should be no cross-subsidy between different packaging materials. The scheme was to be worked up co-operatively with industry. I pay tribute to the work done by the Secretary of State, and to many leaders of industry, who worked extremely hard over a period of years, giving up a massive amount of management time to produce the scheme.
However, I wonder whether all those who worked so hard envisaged the outcome—38 pages of mind-boggling regulations. I do not believe that that is what they had in mind. The Minister told us that 4,000 businesses must comply this year. In 2000, 9,000 businesses will have to comply. A recent survey showed that two out of three businesses are not even aware that the new regulations will come into force. When those business men try to read the regulations, their eyes will not only glaze over, but be double-glazed over, because the regulations are extremely difficult.
Schedule 4 charts the great amount of detailed data required from companies, including the type of packaging. Does my hon. Friend agree that that will put a heavy burden on many companies, and that, in many cases, the cost and complexity of gathering all that information will be greater than that of complying with the VAT regulations?
I congratulate my hon. Friend on having got as far as schedule 4. As he said, not only are the regulations complex; they are costly. My hon. Friend the Minister referred to a cost of £270 million to £280 million. That is the lowest estimate that I have heard, and it does not surprise me that he should give us the lowest. We have heard other figures, between £300 million and £600 million, and up to £1 billion, as the compliance costs on British industry. Those costs will have to be met by British industry in a relatively short time, so we should not underestimate their seriousness. The scheme might be good value, and better value than other schemes, but we must understand that it will be introduced at great cost to British industry.
There was a meeting at the House in January with representatives of the British Fibreboard Packaging Association. Like me and everyone else, they support the aims of the measure. I quote their summary of the worries expressed by much of industry. They state:
Our main ares of concern are the burdensome complexity of the Regulations; their high cost; the risk that they will distort historical trade patterns and put UK industry at a competitive disadvantage to its EU counterparts; and, most importantly, that they may even reduce rates of recovery and recycling rather than increase them … Specifically, the draft regulations now allow any business with packaging waste on its own premises to use that waste to meet its recovery obligation at a much reduced cost compared to those businesses which have no waste arising.
It is understandable that such organisations should be concerned, as 75 per cent. of the product that their members manufacture is already recycled.
We also had representations, again expressing widespread concern, from the Association of Convenience Stores, which represents the owners and managers of 11,000 retail shops around the country. They, too, are worried that the cost of the proposals will fall disproportionately on small grocery businesses. People will ask how small shops can handle 50 tonnes of packaging material, which will be the requirement in the year 2000, but it takes only a small volume of glass to reach that level, so a group of shops might well fall in that category. We must take care to tailor the regulations correctly.
Why have all those concerns suddenly arisen, when we have had years to work up the regulations? I think that it is because of the sheer difficulty of translating into reality the splendid idea of shared responsibility. It is easy for a superstore, with masses of cardboard boxes at the back door and bottle banks at the front door, to meet its 47 per cent. obligation. However, a producer of cardboard boxes, who has no waste left on his premises, can discharge his obligation only by paying out hard cash.
I think that I am right in saying that about half of the 8 million tonnes of packaging waste ends up with the retailer. That gives the retailer a disproportionate amount of power. It is therefore all the more important that retailers should play a part in the co-operative arrangements.
Part of the problem is that the costs arise because we do not have outlets for all the waste materials. They currently have no market value. We must ensure that industrial demand is created for those raw materials as soon as possible, which would place a higher price on the materials, reduce compliance costs and might then make the regulations unnecessary. In the meantime, we must ensure that they operate as intended. Bureaucracy should be kept to a minimum and everyone in the chain, including the major retailers, should co-operate to ensure that the system works. One estimate is that, under the present arrangements, the paper packaging industry alone would subsidise other packaging materials to the tune of £45 million a year. That cannot be fair.
I ask my hon. Friend the Minister to assure the industry that the regulations will work as originally intended. I urge him to repeat his promise of a review in order to meet the challenge posed by the hon. Member for Oldham, West. The regulations must be reviewed before they come into effect to ensure that they will work fairly. We have time: my hon. Friend has said that we are gathering information. Let us use that information to allay the fears that have been expressed. Will my hon. Friend confirm also that he expects the larger retail groups to enter into the spirit of the new Valpak and other co-operative arrangements to ensure that the burden does not fall unfairly on other sectors? Will he reiterate his assertion that the large retailers will not be able to use their surpluses of waste paper materials, such as corrugated paper, to subsidise their obligations regarding other categories of waste materials, such as glass and metals?
I sincerely hope that we shall not create a new, artificial market for waste certificates that is backed up by a large bureaucracy, as occurred with milk quotas. It is absolutely vital that, following the passage of the regulations—we welcome the measure—the new system should be scrutinised constantly to ensure that it leads eventually to a free market solution and not to a costly corporatist burden on British industry and the British people.
Most of the remarks of the hon. Member for Faversham (Sir R. Moate)—particularly the second half of his speech—supported what my hon. Friend the Member for Oldham, West (Mr. Meacher) said. My hon. Friend said that there must be a partnership between Government and industry to ensure that the regulations are applied equitably and that changes are made if and when they prove necessary.
In Committee, it was intended that the Environmental Protection Bill should empower the Secretary of State to introduce regulations. I submitted an amendment on Report, insisting that the regulations should come before the House before they were applied. It is vital that we debate important issues such as this, but I believe that the regulations have taken too long to come to this place.
The House must approve the regulations if we are to meet the significant and tight targets set by the European Union, of 50 per cent. recovery and 25 per cent. Recycling by 2001. The industry debated loud and long about finding an equitable basis for sharing the legal obligations across the packaging chain, and arrived at a compromise solution at its meeting on 15 December. The industry commenced consultations in 1993. The present regulations are not perfect but, as the Minister said, they must be passed tonight. They are pioneering measures.
I am grateful to the hon. Gentleman for giving way and for agreeing with most of the remarks of my hon. Friend the Member for Faversham (Sir R. Moate), who spoke from his great experience in the paper and board industry. Should not the hon. Gentleman emphasise that we must not distort the market in respect of these regulations? It would be unfortunate if, as my hon. Friend said, certain large retailers were allowed to use their packaging to subsidise other areas of their recycling responsibility. That would have an unfair impact on other sectors of the paper and board industry.
I made that point when I intervened on the Minister. He assured me that the market shares the responsibility to collect or recycle certain materials within the recovery chain. I therefore assume that the issue has been resolved, and I shall address it only briefly in this debate.
We must ensure that all sectors of the industry have a common goal of minimising the total cost of the national recovery scheme. Agreement was reached on 15 December 1995 regarding the four principal areas of concern in the packaging chain: the packaging raw material manufacturers, the converters, the packer/fillers, and the retailers.
Agreement was reached on 15 December on the basis of a majority; it was not a unanimous decision. Concern has been expressed since that meeting, and it was comforting to hear the Minister confirm that the regulations are not set in stone and will be reviewed as and when that proves necessary. The purpose of shared responsibility is to reduce the likelihood of any one group being able to profit at the expense of the rest, thereby inflating the total cost of the scheme. That concern has been expressed on more than one occasion.
There is no wicked scenario: companies will make commercial judgments within their sectors. Unless there is regulation to control their activities, the issue will never be resolved fully and companies will continue, quite rightly, to pursue their particular commercial interests. We have a dog's breakfast of regulation because a dog's breakfast is better than no breakfast at all.
We must establish who will regulate the regulations. I believe that that is the duty of the Environment Agency, but the Minister and the Department must take some responsibility for ensuring that the regulations apply fairly and equally across the industry.
I remind the House that the all-party group on sustainable waste management has held many meetings to consider these issues and has listened to speakers representing all sides of the industry. We must address this controversial matter. The Minister's assurances are encouraging, but we must ensure that he delivers on them. Some packaging manufacturers claim that the regulations are inequitable because retailers and supermarkets may carry an unfair and insufficient share of the obligations. Reference has been made to the involvement of retailers and their ability to use transit packaging, predominantly paper and board, to help to discharge their responsibilities. They could easily use the cardboard boxes and paper packaging in their back-yards to fulfil their obligations, whereas, in many instances, those materials should be returned to the supplier in order to distribute the responsibility fairly throughout the industry. Some of the supermarket chains could offset their responsibilities without joining a multi-material collection scheme.
In an Adjournment debate that I secured on 15 January, I suggested that the number of companies excluded from the regulations must be kept to a minimum and that all businesses, people and commercial undertakings involved with packaging must be encouraged to join Valpak or some such scheme. Time will tell whether the £5 million cut-off point is satisfactory. It must be stressed that the regulations should not be a burden on small businesses and that it will be in their interests to join a collective industrial scheme to ensure that their legal obligations are met. The Minister referred to registration. I think that it would be more economical for small businesses to come together for legal advice and in other situations that could develop in the industry.
It is paramount that all kinds of waste must be included in recovery and recycling principles. I refer particularly to plastic and glass. If we are not careful with the regulations, some businesses might have to pick up the most expensive part of recycling and recovery while others will achieve their targets at the least expense. Wood in packaging will also have to be addressed—if not today, in future. That matter was raised in the Adjournment debate, but it has not been settled. As a matter of fact, we have not yet had an interpretation of packaging. The Advisory Committee on Packaging will have to address that, too. Some retailers may find paper and board easier to recover than other materials, and I hope that the advisory committee will monitor that. It must also ensure that the directive's targets, implemented by the regulations, are achieved in a free-market scenario.
The Minister referred to the legislation as pioneering. There may therefore be some conflict in the application of the directive in the market. It would be helpful if the advisory committee were to publish a report from time to time on how the industry is going under the regulations. Is that within its responsibilities? If so, how often could it publish such reports? Would they be available to hon. Members in the Library or the Vote Office?
If the industry is to achieve its goal, it must do so without imposing excessive costs. Reference has been made to some parts of the industry having to meet excessive costs of £40 million or £45 million. Indeed, packaging recovery in some European Union member states has carried excessive costs. The German scheme has been mentioned. I am advised that, in Germany and Austria, citizens pay about £20 a year in inflated product costs so that certain targets can be reached. That point was made in exchanges earlier. The Government are suggesting a cost to United Kingdom citizens of between £5 and £11 a head a year. If such a target is set, a monitoring exercise must be undertaken to report on progress in achieving it. We should receive progress reports on how the advisory committee is viewing the legislation and the regulations.
My hon. Friend the Member for Workington (Mr. Campbell-Savours), who was in his place at the beginning of the debate but had to leave, asked me to pass to the Minister a number of questions from his mailbag. Due to the shortness of the debate, I shall not read them out.
I am sure that that will meet my hon. Friend's concern. He had to leave to attend a Committee, so I said that I would make the points on his behalf.
I support the regulations, but stress that hon. Members who have an interest in the way in which they work out before the two-year period ends should be provided—if not directly, through the Library—with progress reports from the advisory committee.
My hon. Friend the Member for Faversham (Sir R. Moate) has been hearing from small businesses. I have the honour of being chairman of the all-party retail industry group. My hon. Friends will be aware that, under the regulations —the hon. Friend the Member for Oldham, West (Mr. Meacher) referred to it—retailers have 47 per cent. of the recovery obligations. With the packers and fillers, that comes to 83 per cent. of the responsibility for recovery of packaged waste.
The British Retail Consortium, the Food and Drink Federation and the alcoholic drinks industry have issued a joint statement in support of the regulations. A number of distinguished members of the all-party sustainable waste management group have worked over the years on how we are to survive, given our packaging methods, and how we are to achieve recovery and recycling. Whatever criticisms and concerns are expressed, everybody must support the regulations. My hon. Friend the Member for Faversham referred to small businesses in the retail industry. I should like to make two points about them.
I, too, have had correspondence with the Association of Convenience Stores which, as my hon. Friend the Member for Faversham said, comprises 1,500 retail member companies. It supports almost 11,000 local stores and 101,000 employees. The association is very worried that the regulations will be a burden on its members. Although businesses that handle less than 50 tonnes of packaging waste a year or have annual turnovers of less than £5 million will be exempt until 2000, the threshold will then be lowered to a turnover of £1 million. In today's market, that is not such a sum, and it could be achieved by a fairly small business. Some concern has been expressed by small retailing groups that burdens will bear disproportionately on small retailers.
The British Retail Consortium has been undertaking some research to try to correlate the financial turnover in different kinds of retailing businesses with the amount of packaging handled by such sectors. Not much research at present helps small retailers in that respect. If the BRC research indicates that unnecessary burdens will be experienced by small retailing businesses, it will provide the advisory committee with details so that the committee can consider the appropriateness of changing the threshold.
Although I am reassured in part by the comments of my hon. Friend the Minister about the continuing review, I hope very much that he will emphatically reassure small retailing businesses that the threshold particularly will be one of the factors that are taken into account by the Advisory Committee on Packaging during the two-year period when it considers the burdens that will be placed on the smaller sections of the retailing business.
The regulations aim to achieve the dual objective of a continuing improvement in our recycling capacity without harming our competitiveness. That can be achieved, but in seeking a balance between regulation and a free market we are bound to have problems.
At some stage, the Government should say, "This is the objective, and we have to achieve it." I believe that much of the delay has been caused by the difficulty of getting full agreement, given that everyone in the sector is competing for an advantage in the market. I am not criticising any of the players for the delays and the difficulties. I would rather that regulations were laid today than we had no regulations at all. I back my hon. Friend the Member for Oldham, West (Mr. Meacher) on that point.
We must ensure that the regulations remain on course. When I mentioned the Environment Agency in my intervention, it was not a disparagement or a criticism. We must ensure that the agency is fully equipped and resourced to carry out its policing and auditing role. Many of us who are interested in this area, and many in the private sector who will be affected by the regulations, do not want to criticise the Environment Agency, but we want to know whether it has the necessary resources.
There is a parallel with the Environment Trust, which was established by the same Secretary of State for the Environment. The problem was whether, with only a chairman and a part-time secretary, it could deliver a system that worked. The evidence up to now is that they are having great difficulties making the system work. I put that in the Minister's mind, although by the time anything happens, the changes will be made by a Minister with a different political complexion.
It is important for industry to know that we are on track to achieve the two objectives: good recycling and meeting targets. Unless we are geared up, I suspect that we shall not meet the targets for the end of the century. We should develop expertise in this country, which we could sell to the rest of the world. There is a great market in waste management. It requires an understanding of the pressures and the best ways of using the different technologies—not just recycling—to tackle the problems of waste management in a sophisticated urban economy. That is a great challenge and we could have a competitive advantage over other European countries. We must seize that advantage and find the right balance.
My hon. Friend the Member for Oldham, West has never been a great admirer of the German system, but he believes in a good regulatory regime. All of us who know anything about this business know that the right balance is to have a good regulatory regime and to listen to the private sector, which ultimately has to make a profit.
I apologise, Mr. Deputy Speaker, but the Whips who assist us had calculated that I would be speaking slightly later. I apologise for the delay. [Interruption.] I did not hear the Minister, who made a remark from a sedentary position. I congratulate my hon. Friends on their important contributions to the debate, which were based on knowledge of the subject and were supportive of the remarks of my hon. Friend the Member for Oldham, West (Mr. Meacher).
The draft regulations in the European directive have satisfied no one. There has been enormous delay in bringing them to the House. As we have heard from Members on both sides of the House, the regulations contain nothing that we can wholly praise. As my hon. Friend the Member for Huddersfield (Mr. Sheerman) said, we are left with a dog's breakfast which we have had to acknowledge is better than no breakfast at all.
The Minister made much of the consultation that the Government have had with industry. My hon. Friend rightly criticised that consultation as being incomplete and imperfect. It excluded the other obvious players in the field: the whole of the waste management industry, local government and the voluntary sector. It is not reasonable to consult and pursue ideas about regulations on packaging without involving those important key players.
Under these arrangements, the retailer may displace existing local authority schemes and efforts. The provisions will not lead to a new recycling tonnage, and could affect the economies of scale that local authorities are able to make. That is enormously important: Labour local authorities have been at the forefront of recycling, albeit at the low levels that we have achieved in Britain.
The Minister said that it was important to use market mechanisms, and that only the markets could deliver. The arrangements in the directive are unlikely to lead to the creation of those markets. The producer responsibility mechanism is almost wholly geared to generating or rearranging the supply side of recycling. A number of Conservative Members represent the paper and board industry. They will know that the newsprint recycling industry is already suffering from a glut. What is needed is not just a rearrangement of the supply side, but the setting of post-consumer recycled content quotas which would ensure effective markets. Nothing that the Minister has said leads us to believe that that will happen.
Throughout the regulations, there is little interest in creating markets for recycled goods. More significantly, there is a lack of any mechanism for waste reduction. The Minister said that the Government's intention—I hope that I quote him accurately—is to minimise the amount of packaging produced and to encourage as much re-use as possible. Neither I nor any of the expert commentators whom I have consulted have been able to find where in the regulations those mechanisms are established. Indeed, the regulations are likely to legitimise the status quo by encouraging increases in waste overall, even though the percentage recycling target may be achieved.
I want to comment on European comparisons. Much has been made of the system in Germany, which has been vilified. We all acknowledge the difficulties and the lack of appropriate markets created in advance of the arrangements. Virtually every other European nation is ahead of the United Kingdom in the packaging sector. In every type of packaging material, the leaders usually recycle at least twice the amount recycled in Britain, so there is no room for complacency in regard to packaging regulations.
In view of the short time at our disposal, I shall not repeat the points made by my hon. Friends. A little humility from Ministers would not go amiss, given the massive delays in the United Kingdom's compliance with the European directive. No one is satisfied, either in the House or outside. We shall not oppose the regulations as we know that in government we shall be able to revise them in the interests of business and the community at large.
With the exception of the contribution from the Opposition Front Bench, the debate has produced what I regard as a wide measure of agreement and a warm welcome for the scheme. It involves the important principles of producer responsibility, shared responsibility throughout industry and dialogue between Government and industry, which we have been keen to see throughout the whole process. That has resulted in what we consider to be a low-cost, efficient approach to waste recovery which combines a light regulatory touch with deterrence to those who seek a free ride.
My hon. Friend the Minister of State was right to say at the outset that these are pioneering regulations. We shall need to listen to the concerns that are expressed to us as the regulations unfold, and it was for that purpose that we established the Advisory Committee on Packaging under Sir Peter Parker. I am sure that the committee will want to take on board many of the views expressed today by hon. Members on both sides of the House.
My hon. Friend the Member for Faversham (Sir R. Moate), who drew attention to the great success of the paper industry in recent times, made some important points. I believe that he was particularly enlightened in stressing the great advantage of the scheme: the fact that it was developed through co-operation between Government and industry. That is a fundamental point. As for the points of detail on which my hon. Friend sought reassurance, I believe that I can give him that reassurance. As I have said, we shall keep the process under review and we shall require information before the regulations are implemented. This year will be devoted to the gathering of information and registration and the regulations will come into force in 1998–99.
My hon. Friend also mentioned larger retailers. My hon. Friend the Minister of State said a little about that in his opening speech. I emphasise again that we expect large retailers to be part of the collective schemes and to play their part in them. We think it unlikely that large retailers will be able to come anywhere near fulfilling the whole of their obligation—which, as has been said, amounts to 47 per cent.—through the waste collected at their back door; we believe that they will therefore find it necessary to join a collective scheme.
My hon. Friend the Member for Faversham raised the question of material cross-subsidy. One of the criteria against which applications for schemes will be considered for registration by the Environment Agency is the minimisation of the potential for such cross-subsidy. That will be an important consideration during the competitive scrutiny of prospective compliance schemes. I hope that I can reassure my hon. Friend further by revealing to him the attitude of Sir Peter Parker, who has said in a letter to my right hon. Friend the Secretary of State that he considers it
important to ensure that all sectors play an equitable part in relation to the domestic waste stream".
I am sure that Sir Peter will approach his chairmanship of the advisory committee very much in that spirit.
My hon. Friend the Member for Faversham was concerned about small businesses, as was my hon. Friend the Member for Medway (Dame P. Fenner). They will know of the thresholds applying to small businesses. There is a turnover threshold of £5 million, rising to a £1 million threshold by the year 2000. We shall be keen to listen to the voice of small business, as I am sure the advisory committee will be as well.
In a balanced and authoritative speech, the hon. Member for Normanton (Mr. O'Brien) also rightly emphasised the need for co-operation and the need for all four principal parties in the waste chain to be involved. The hon. Member for Huddersfield (Mr. Sheerman) made what I interpreted to be a not entirely unwelcoming speech. Given that background, it is a shame that Opposition Front Benchers had to resort to nit picking. They expressed their confidence in the outcome of the election, which is something of a ritual for Opposition parties. I believe that the result will be the same as it has been on so many occasions in the past, but I must tell the hon. Member for Oldham, West (Mr. Meacher) that I also believe that if his dreams were to come true and his party were to form a Government, the hiving-off process that he envisages would be overtaken by another process of hiving off which might affect the hon. Gentleman himself. Certainly, we do not regard it as hiving off—