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Is Scotland's Deposit Return Scheme all washed up?

Design: Vicky Axelson

Is Scotland's Deposit Return Scheme all washed up?

What began as an effort to boost recycling rates has become a constitutional bin fire that is raising the temperature in an already-heated political climate.

On paper, it seems hardly believable that Scotland’s Deposit Return Scheme (DRS) could become this contentious. After all, the legislation underpinning it was approved by all five parties in the Scottish Parliament. And, let’s face it, it’s about keeping single-use drinks containers out of landfill – surely something few could take issue with during this climate crisis.

But after the UK Government called for key changes before it will grant the required internal market permission, Lorna Slater, Scotland’s circular economy minister, has raised questions about whether or not it can go ahead. And the row over including glass in the multi-material reuse push is laying waste to the fractured relationships between the UK and Scottish governments. 

Westminster leaders called for glass to be removed from Scotland’s scheme because it is not included in that planned for England in 2025. The difference, they said, could create a “potentially permanent divergence” in the UK internal market – something that post-Brexit regulations exist to prevent. But removing glass, Slater says, would leave broken shards of discarded empties on beaches, upturn the finances of the whole enterprise and threaten climate targets. And she has accused the UK Government of pursuing a “scorched earth approach to devolution” in what must be amongst the strongly worded statements to be delivered in the chamber. “We cannot even introduce a recycling scheme without it being sabotaged by bad faith actors in the UK Government who never supported devolution in the first place,” she stated, linking the issue to other cross-border beefs like Brexit and the Gender Recognition Reform (GRR) Bill.

Slater’s uncompromising response to the UK Government’s position, which includes the creation of UK-wide labelling and registration systems, comes despite concerns voiced from within the drinks industry itself.

The Scottish Government says it “should” have a decision on whether to go forward before summer recess.

If DRS fails, who will be left to carry the can, and what are the broader consequences for consumers, industry and government? And when cut-through is political currency, how much does the public care?

Political scientist Sir John Curtice, of the University of Strathclyde, says the level of cut-through is questionable, given the low level of polling down on the matter. However, a survey of 1,000 adults by Ipsos in March found that 55 per cent of Scots had heard a “great deal” or “fair amount” about DRS, 49 per cent were in favour of it and 51 per cent thought they would “always” or “frequently” return their empty drinks containers. Doing so at retail or hospitality venues would allow them to reclaim a 20p levy on each single-use container sold, but there have been concerns about the accessibility of the scheme for people with sight loss or mobility issues. 

The Ipsos data, Curtice points out, was gathered before UK ministers sent their Friday night missive to first minister Humza Yousaf and his team, and therefore before the removal of glass became an issue. “The free flow of trade across the United Kingdom is vital to businesses and consumers and it is right that the law creates a strong presumption of mutual recognition and non-discrimination across our shared market,” they wrote, citing the UK Internal Market Act (IMA). That post-Brexit legislation carried controversy from the get-go, with the Scottish Parliament withholding legislative consent and the Scottish Government branding it a “power grab” which would impinge on devolution. That was dismissed by the UK Government, which called the IMA a “power surge” as the need to go along with European laws ended. “I would guess this is the first time the IMA has really bitten in terms of using its provisions to constrain what the Scottish Government can do in a devolved area,” Curtice tells Holyrood. “It’s probably an area where the political battle has yet to be juried.”

On one side of that battle is a UK Government which has positioned itself as a defender of the law and common frameworks; on the other is a Scottish Government which has set itself as the champion of the environment and Scottish democracy. “This is not just about broken glass; it is about a broken union – a union of supposed equals exposed as being anything but by a Tory government pursuing a scorched earth approach to devolution,” Slater said.

And while she has linked the UK’s red line to its blockage of the GRR Bill – a matter which will come to court in the first case of its kind – Curtice says it is not the same. “We know there is a tendency for people’s attitudes to the GRR government veto to follow their views on the substance of that issue. We might therefore guess that if people are in favour of DRS, perhaps they will be more likely to be opposed to the UK Government actions over DRS – but that is a hypothesis at this stage.”

Criticism of a lack of certainty has dogged the Scottish Government scheme, which has twice been pushed back. In March, the Association of Convenience Stores reported that almost half (47 per cent) of independent retailers did not know how they would approach the DRS, which is due to go live in mid-August. In the same month, legal firm Pinsent Mason said the same applied to many hospitality businesses, despite efforts by scheme administrator Circularity Scotland to address these.

There has been critique of the large salaries for seniors at the not-for-profit organisation, with chief executive David Harris taking home £300,000 and six other board members sharing almost £370,000 in fees. Labour’s Colin Smyth MSP branded those sums “excessive”, questioning value-for-money for the small producers he said are “deeply worried about the cost of the scheme”. 

Smyth is far from alone in questioning aspects of DRS, with Conservative Craig Hoy asking whether the scheme could affect pricing under Minimum Unit Pricing (MUP) laws. Could any increase in product costs see consumers switch from “lower strength, lower volume products to higher strength, higher volume products that are cheaper”, he asked in December, querying what work had been done on this.

A bottle of vodka would rise from around £13.13 to £13.33 (51p per unit) under the system, while a multipack of beer could go from £13.20 to £17.20 (65p per unit), according to the Scottish Beer and Pub Association, which has raised concerns that the price uplift could push lower-income consumers into higher levels of alcohol consumption, potentially undermining MUP and its health aims. Answering Hoy’s question, Slater said further work on that was underway to ensure that the “interactions” between MUP and DRS “continue to be understood as the scheme evolves and [are] kept under review”.

The question and answer were predicated on the flat 20p deposit proposed on containers. However, that level may be about to shift if DRS is to go forward. In the chamber, Slater said the removal of glass from Scotland’s DRS “makes no sense economically” because a UK Government impact assessment from 2021 showed “the social benefits of reduced litter, emissions saved and improvements to the economy are increased by 64 per cent when glass is included, taking the value from £3.6bn to £5.9bn”. It would also, she said, risk “critically undermining the commercial viability of DRS” and creating “significant knock-on effects” including a change to fees on plastic and cans to cover the sunk costs of glass. “Glass will make up between a quarter and a third of volumes recycled,” she said. “Removing it now will severely reduce the scheme’s income, while the glass-related costs are largely sunk.”

Labour’s Sarah Boyack asked how much this increase might be, but no answer was given as the session moved on. 

And so many are now questioning how the scheme has come so close to the point of launch without clarity on the IMA exemption and other matters, and there have been calls for Slater’s sacking. That’s despite the legislation dating from before she was elected. Humza Yousaf is standing by the Green minister, and he has said the Bute House Agreement that brought her and fellow Green Patrick Harvie into government is “worth its weight in gold”. The terms of that deal require the FM to nominate two Green MSPs to be ministers “after consultation with the co-leaders” of that party, and commits him to consulting with those co-leaders “before making any alterations to the responsibilities of these ministerial offices or making any new appointments” to them. Given that Slater and Harvie are those co-leaders, moving Slater from office may involve some awkward conversations.

Regardless of who is circular economy minister, the fact remains that businesses have sunk millions into the scheme, which aims to make those responsible for the production and sale of single-use containers responsible for their disposal and reuse, saving councils money on refuse services. Further delays to the scheme, or its cancellation, mean those payments may turn into money for nothing. Mo Razzaq of the Federation of Independent Retailers, says it would be unacceptable for his members to pay for more waiting. “They keep blaming Westminster,” he told the BBC of the Scottish Government, “but we told them; we have told them the scheme was started by themselves. We worked for over six years with the Scottish Government on this scheme, so we expect them to pick up the tab.” 

Neither government wants to pay what would be significant sums in compensation. And the question of how IMA, passed six months after the DRS legislation was agreed, has been an issue from the start. LibDem peer Jeremy Purvis asked about it in the Lords in October 2020, saying members of the Scottish Parliament had “legislated in good faith in a perfectly legal way”. 

That issue of acting in good or bad faith hangs over this row. A former Scotland Office insider told Holyrood that the department had “always” acted in good faith in its dealings with Scottish ministers. However, Green MSP Mark Ruskell has accused the UK Government of “playing politics”. On the contrary, Conservative MSP Maurice Golden says it is Slater trying to “pick a fight with the UK Government – anything to distract from the mess that the minister has made of deposit return”.

However, supporters of Scotland’s DRS have made much of the January announcement by the Department for Environment, Food and Rural Affairs (Defra) that the DRS for Wales would include glass bottles. That programme is less advanced than Scotland’s with no regulations set. However, Slater says her administration is “in lockstep with the Welsh Government on the matter”. 

The Cardiff government told Holyrood its plans to include glass have not changed, following a consultation carried out with the UK Government, with which it is working on a joint project to implement a DRS covering Wales, England and Northern Ireland. When the research took place, the materials involved were consistent with those for Scotland’s DRS, with glass removed by the Westminster as the design of the scheme was finalised. According to the Labour-led Welsh Government, the decision that UK ministers made for England “should not in any way limit the ability of the Welsh Government” to follow its plans. “The Welsh Government has not sought an exclusion from the UK Internal Market Act and we do not recognise that the UK Internal Market Act limits the ability of the Welsh Government to legislate in areas of devolved competence,” it said.

That rhetoric is indeed similar, if less strongly worded, to that of the Scottish Government. And at a recent meeting of the Scottish Affairs Committee, Scottish secretary Alister Jack had some strong words of his own when it came to his Edinburgh counterparts. “The Scottish Government get up each day and go to work to destroy the United Kingdom and I get up each day and go to work to strengthen the United Kingdom,” he told the MPs, describing this as an “honest” assessment and stating that his job is to “defend devolution”.

He said similar in his letter to Yousaf and Slater, which was co-signed by levelling-up secretary Michael Gove and environment secretary Therese Coffey. “The proposals you have put forward will affect thousands of businesses in England, Wales and Northern Ireland as well as those based in Scotland,” the letter said. “This will be particularly acute for small producers outside of Scotland who may choose to stop selling their products in Scotland.” 

But Yousaf has said removing glass will be to the “severe detriment” of major firms like Irn Bru and Tennents, the latter of which has said it would be left at a disadvantage so significant that jobs and investment would be at risk. Taking glass out of DRS, and thereby lifting the levy and need to return those vessels, would disincentivise the purchase of its can-based beverages, the firm fears.

And so we reach an impasse that industry and the consumer can ill-afford, with both sides recycling well-worn lines of argument. In this highly-charged politics, breaking through will require concerted energy.

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