My Lords, I declare my interests as stated in the register. I am pleased, as always, to follow the noble Baroness, Lady Bennett of Manor Castle, although I regret that the mover of the lead amendment, the noble Baroness, Lady Jones of Whitchurch, spoke five days ago; I had to look up Hansard to remember what she said. I have some sympathy with her Amendment 133, and agree that deposit return schemes should be introduced as soon as possible. I also believe that it is crucially important to get them right. It is worrying that Scotland has rushed ahead with its own scheme in an area where we definitely need UK-wide compatibility.
I support Amendment 133A in the names of the noble Baroness, Lady Jones, and the noble Viscount, Lord Colville of Culross, and others, that the scheme should, at a minimum, apply to PET, glass, aluminium and steel containers of volumes under 3 litres. I was a non-executive director of Lotte Chemical, at Wilton, on Teesside, for nine years, until the end of 2019, when the company was taken over by Alpek Polyester. It holds a 70% to 75% market share in the UK and Ireland as the leading supplier of polyethylene terephthalate. The plastics tax is likely to disadvantage PET producers in favour of glass and aluminium producers, with the unintended consequence that producers will switch from PET to glass and aluminium containers, which have a carbon footprint four or five times higher than PET.
The noble Baroness, Lady Bakewell of Hardington Mandeville, proposed exemptions from the plastics tax in her Amendment 141. The noble Baroness, Lady Jones of Whitchurch, expressed concern that the deposit return scheme might lead producers to switch from aluminium or glass to plastics. My concern is the reverse: besides the much lower carbon footprint associated with PET, does the noble Baroness really want to go back to the days when we cut our feet on discarded glass bottles on the beach?
The answer is not to penalise PET but to introduce a deposit return scheme as good as Germany’s, where 98% of PET bottles are collected for recycling. We have a long way to go. Germany is not often held up as an example of a unitary state with centralised powers, but the successful German deposit return scheme is a national scheme applied in all the Länder identically. If the United Kingdom is to prosper and global Britain is to succeed as we expect and hope, it follows that the leaders of our devolved authorities might be less impatient and more willing to work together to agree the details of one national scheme across the whole United Kingdom.
I will speak to Amendments 134A, 134B and 138A tabled in my name and the name of the noble Lord, Lord Berkeley, for whose support I am most grateful. These amendments take account of the needs of small producers, including small brewers, within the proposed deposit return scheme and recognise that the proposed measures will introduce significant, disproportionate costs and regulatory burdens for small businesses. I strongly support a deposit scheme such as that proposed in the Bill in principle, because it would help to tackle our waste and littering problems, but I ask my noble friend, is he mindful of the burdens on small businesses introduced by the Bill that may make it difficult for them to compete against much larger producers?
Many small brewers have had great difficulties surviving through the pandemic. With pubs closed, the only way that they could keep their products on sale has been to sell them in bottles and cans. It is very expensive for small brewers to make the necessary changes to packaging and labelling. It is likely that the four large brewers, which hold 88% of the beer market, will absorb the cost within their profit margin, thereby driving small challengers and craft beer manufacturers out of the market. Besides this, the costs and difficulties of participation in the scheme seem disproportionate for small brewers.
The fact that Scotland is ahead of the rest of the country is another problem. Brewers sell beer through wholesalers that sell in both England and Scotland. The brewers do not know how much beer their wholesalers sell in each part of the UK, yet the Scottish Government, in the operation of their scheme, have suggested that brewers will have to provide vast swathes of information that they do not currently possess. It is important that any deposit scheme adopted is completely interoperable with the Scottish one. Can my noble friend confirm that we will have, in effect, an identical scheme operating across the whole country? Is it not a problem that the Scottish scheme does not require recyclable products to be clearly labelled as such? There may well be unintended consequences if the schemes are not completely aligned.
Can my noble friend also say whether the Government accept the need for public education about the new scheme, which will be necessary to change public behaviour towards recycling? Does he agree that there is at least a strong case for exempting small breweries producing less than 900,000 pints a year from the new requirements? Indeed, the Government’s better regulation framework states that the default position
“is to exempt small and micro-businesses from … new regulatory” requirements. While the Government have proposed in the recent consultation to allow small retailers to apply for exemptions under the deposit schemes, the same exception has not been extended to small producers.
In both the extended producer responsibility and the plastic packaging tax, the Government have included a de minimis threshold. In other areas, such as nutritional information, those with fewer than 10 full-time equivalent staff and a turnover of below £2 million are exempt. Therefore, I have tabled these amendments and ask my noble friend to consider how the Bill will support our small producers in a similar way to small retailers.
Under the proposed deposit scheme, small producers will have to redesign their labels to incorporate bar codes and logos at significant cost. They will have to pay a producer fee per container, which could cost the beer industry alone £200 million a year—the equivalent of a 6% increase in beer duty. They will have to collect and provide a great deal of additional information, which could lead to a delay of six weeks or more before they can bring new products to market and will impact innovative small brewers that produce seasonal and one-off beers.
Amendment 134A would allow the DRS to take account of the size of the producer when setting its fees and scope, allowing the Government to vary the scheme accordingly. Amendment 134B would exempt the smallest brewers, which produce less than 5,000 hectolitres a year—the equivalent of 900,000 pints, or enough beer to serve 15 community pubs. This is in line with the Government’s current small brewers relief scheme, which allows small brewers to pay a proportionate amount of duty to the Treasury. This Bill will create a scheme administrator called the deposit management organisation, which would be responsible for the operation of the DRS. Amendment 138A would provide a safeguard to hold this body to account for how it treats and takes account of small producers.
I hope that my noble friend can consider and address the issues raised in these amendments.