Scottish Parliament statement on the Deposit Return Scheme - Dec 14

The Minister for Green Skills, Circular Economy and Biodiversity (Lorna Slater)

When I updated the Parliament last month, I underlined the Scottish Government’s commitment to delivering an operational deposit return scheme as soon as is practicably possible. Since then, we have continued to work closely with both Circularity Scotland and the industry to agree a final timescale and clear milestones for delivery. Members have also had the opportunity to be briefed by Circularity Scotland on the implementation.

Last year, when the Parliament passed legislation to establish deposit return, we all hoped that, by now, we would be further along the path to introduction than we are. As a result of the pandemic and of the uncertainties caused by Brexit, an independent review of the scheme was commissioned. Today, we have published its report.

The review concluded that the implementation date of July 2022 was not achievable, and that delivery in July to September 2023 was possible but carried a significant risk to achievement. It also identified the following actions: agreeing a critical path with key stakeholders for the delivery of a viable product by the agreed start date; the United Kingdom Government reaching a decision on the VAT treatment of deposits; reviewing the governance structure so as to reflect the implementation phase and establish an objective assurance regime that is aligned with key milestones; and working with industry to develop and resolve practical issues in online sales.

Since taking up my position as minister for the circular economy I have worked intensively to put the DRS back on track. My background is in engineering project management, and I have made it my priority to develop and agree a project plan for delivering a scheme that I, the industry and stakeholders can have confidence in.

Implementing the deposit return scheme is a massive national undertaking, involving contracts with more than 4,000 producers, and tens of thousands of return points, for the management of more than 2 billion containers per annum, with a total turnover of around £500 million. It is essential that the scheme is a success not just in the short term but for decades to come.

Taking into account the independent advice that we have received, and input from stakeholders, I can announce that the work to implement Scotland’s—and the UK’s—first deposit return scheme will conclude with the scheme’s launch on 16 August 2023. However, work will intensify immediately and, as I will mention shortly, I hope that the scheme will operate on a voluntary basis in some premises before that date.

Our DRS will be among the most environmentally ambitious and accessible in Europe. It will include tens of thousands of return points for plastic, metal and glass containers, as well as pick-ups for online deliveries. Although some have asked for a reduction in the scope of the scheme, that will not happen. Having an ambitious deposit return scheme that can equitably cover both online and high street sales brings challenges, but I am confident that the industry can deliver solutions to those, particularly given the extra time that it now has. In early 2022, my officials will host a workshop with the Scottish Environment Protection Agency and retailers, to focus on the details of online take-back.

I confirm that, despite the delay, producers will be required to meet a 90 per cent collection target by the second year of operation, rather than by the third, as previously planned. That will ensure that the scheme maximises its environmental impact from 2024, as before.

I, Circularity Scotland and the Scottish Government are keen to support businesses in their planning to make sure that that implementation date happens. Retailers are playing an essential part in the scheme, as most of us will use their stores for returning the containers and receiving back the deposit. I know from speaking to them that they are strongly committed to the success of the DRS and that they have already put in a lot of time and resource in preparation for its roll-out, which will ramp up in the year ahead.

As part of the phased implementation of the DRS, a key milestone will be visible to consumers from summer 2022, when retailers will start rolling out the return infrastructure in stores. We are working with the retail industry to start phasing in the use of that infrastructure, on a voluntary basis, from November 2022.

We recognise that the needs of rural areas may be different from those of more populated parts of the country. I am therefore pleased to let members know that there will be a return scheme in place in Orkney, also from November 2022, which will provide immediate benefits to the community.

Regulations asking Parliament to approve the change in go-live date will be laid tomorrow. We will also take the opportunity to make several smaller amendments to the Deposit and Return Scheme for Scotland Regulations 2020. In the year and a half since the regulations were passed, many organisations across the private and public sectors have been working hard to consider how the DRS can best be implemented. Those discussions have thrown up points on which we accept that small changes will provide additional clarity or help to de-risk the scheme’s implementation.

I am looking forward to engaging with members from all sides of the chamber as we move into the scrutiny process. I can confirm that the changes will include allowing online retailers, and others selling through a distance sale, to refuse to accept a return of a disproportionately large number of containers. I will clarify that: for products that are filled and sealed in a retail or hospitality setting—for example, crowlers—the person filling them will bear the responsibility for their collection. The changes will also include creating a duty on wholesalers or others who are selling articles not intended for sale in Scotland to disclose that at the point of sale, thereby helping to prevent fraud, and bringing SEPA’s enforcement powers more into line with existing legislation.

There are a number of key milestones on the path to August 2023. By March 2022, Circularity Scotland will have signed contracts with partners to deliver its logistics, operations and information technology systems. By August 2022, the public awareness campaign will be launched and, in the same month, counting and sorting centres will start to be built. As I have mentioned, retailers will start rolling out the return infrastructure in earnest from next summer, and we are working with them to start using that infrastructure on a voluntary basis from November 2022. In January 2023, Circularity Scotland and SEPA will begin the process of registering producers. In July 2023, there will be end-to-end testing of a DRS container through the whole system.

Strong and robust governance structures must be in place to oversee the scheme’s implementation, recognising that, with the appointment of Circularity Scotland and the passage of legislation, responsibility for successful delivery is increasingly dependent on the actions of producers and retailers across Scotland. The scheme is a shared endeavour, and my officials will be establishing a system-wide assurance group early next year with all those who are involved in delivering it, so that, collectively, we can monitor delivery and manage risks.

Senior executives from the Scottish Government, Circularity Scotland and our environmental public bodies will meet regularly to review progress against milestones and take action where required. I have established a communications and engagement group, which is led by Zero Waste Scotland, to ensure that businesses and the public have the information that they need as we progress towards full launch. As with this year’s independent review, we will ensure that external expert assurance is provided at key points.

I will receive regular updates from those groups, and will personally regularly meet Circularity Scotland to discuss progress. That close oversight, coupled with the public milestones that I have laid out, gives me confidence that all organisations have the right governance arrangements in place to collectively deliver the deposit return scheme on time and in a way that works for the people and businesses of Scotland.

It could not be clearer that the purpose of deposit return is environmental, not to raise revenue, so it is hugely disappointing that the UK Government is maintaining that VAT applies. The issue is not just the additional cost that that brings. I understand from industry that there are still many details to be ironed out with the Treasury’s proposal, and that there are specific technical challenges that exist—for example, because VAT is not applied equally through all parts of the system—that will affect the financial flows between thousands of different actors in the scheme. We will, of course, continue to work constructively with HM Treasury, Circularity Scotland and wider industry to ensure that a solution is put in place in a way that is workable, effective and efficient for businesses.

Between now and August 2023, there is a lot of work to be done and a lot of investment to be made. I will keep in close contact with industry on the delivery of the key milestones as different parts of the system roll out their implementation plans.

Members will see from the documents that I have released today that the independent reviewers recognise the co-operation, effort and enthusiasm of all stakeholders in working constructively to achieve an effective scheme. I appeal to all members in the chamber today to work with us to make it the best scheme possible for Scotland.

The Deputy Presiding Officer

The minister will now take questions on the issues raised in her statement. I intend to allow about 20 minutes for questions.

Maurice Golden (North East Scotland) (Con)

I thank the minister for advance sight of her statement. Like the last update on the deposit return scheme, the statement raises more questions than it answers. We now have yet another launch date, but how can we take it seriously? Only a month ago, the minister was refusing to give a launch date after delaying the scheme for a second time—that was despite Circularity Scotland issuing a tender last month that mentioned a launch date of summer 2023. The minister has either lost control of the process or deliberately misled the Parliament about the launch date in a previous statement.

This comes as recycling is getting worse. Remember, deposit return is supposed to improve recycling. The figures out last week showed that the recycling rate has dropped for the second year running and is now at its lowest point since 2013. If the minister is serious about launching the deposit return scheme, we need straight answers. Unfortunately, today’s statement is the same shambolic process, full of excuses. There is no word on the start-up costs or how they will be funded, no word on the secretive tender process, no word on whether return vending machines will even be built in Scotland and, as in the previous statement, there is little today to reassure businesses that will be affected. There is no word on preventing fraud and bottle bank raids, no word on potential restrictions on products and no word on whether, since the last statement, the minister has even met businesses that will be affected.

Businesses and the public have been marched up the hill and back down again too many times. I ask the minister straight: is she prepared to stake her professional reputation as a Government minister on the new launch date?

Lorna Slater

I thank the member for the question, for his enthusiasm for the deposit return scheme, and for his keenness to see it implemented as soon as possible, especially given that, when the legislation was launched in May 2020, the Conservative Party argued for a delay due to the Covid pandemic and the unrolling situation. I would hate to accuse a member of political opportunism; I sincerely welcome his change of direction and I am glad that he does not want the deposit return scheme to be delayed.

I am absolutely committed to implementing the deposit return scheme as quickly as practicably possible. I consider that the date of 16 August 2023 is doable, but still challenging for industry, particularly in light of the on-going pandemic. I expect the member to follow our progress and the milestones closely. I look forward to reporting back on them.

Colin Smyth (South Scotland) (Lab)

I thank the minister for advance sight of her statement. August 2023 will be more than two years later than the first date proposed by the minister in 2019 for the introduction of a deposit return scheme, seven years after the First Minister first committed to such a scheme for Scotland, and nearly 15 years since the Parliament gave ministers the power to introduce such a scheme, under the Climate Change (Scotland) Act 2009. However, businesses are still no clearer about how the scheme will work, particularly when it comes to cross-border issues, which are massive for those living in the South Scotland region.

If the Government cannot even deliver a bottle return scheme by when it said that it would, what chance do we have of delivering net zero by 2045, or any of our continually missed climate targets?

The Government’s impact assessment shows that delays would cost local government £6 million a year in additional costs related to street cleaning, bin emptying and recycling centre gate fees, at a time when the Green-SNP Government has just proposed a £344 million real-terms cut in council budgets. Who does the minister think will pay the extra bill for the Government’s incompetence and delay after delay?

Lorna Slater

As I said to Mr Golden, I welcome the member’s enthusiasm for the scheme and his desire to see it implemented as soon as possible. That represents a change in direction for the Labour Party, too. In the debate in 2020, the Labour Party shared the Conservative Party’s concerns that the 2022 date, in light of the Covid pandemic, meant that we were rushing implementation. I welcome the change of direction from Labour and their support for the quickest possible implementation of the deposit return scheme.

Scotland’s deposit return scheme will be implemented by industry, as represented by the scheme administrator, Circularity Scotland. That body represents Scotland’s producers and retailers and is a private not-for-profit organisation. Many of those retailers and producers have been particularly badly affected by Brexit and the Covid-19 pandemic. Our independent review concluded that Brexit and Covid-19 have had a material impact on the schedule for the delivery of the project.

Is the member really suggesting inflicting further financial penalties on Scotland’s small breweries, hospitality businesses and Convenience stores for delays that are due to Brexit and Covid and that are in no way their fault? Those businesses have already had to cope with so much. I am working with Scotland’s producers and retailers to deliver one of the world’s most ambitious deposit return schemes as quickly as we possibly can under the circumstances in which we find ourselves.

Stuart McMillan (Greenock and Inverclyde) (SNP)

Will the minister provide an update on discussions that she has had with Scotland-based engineering businesses that can play their part in supplying the equipment that will be needed for the implementation of the DRS?

Lorna Slater

In line with the principle of producer responsibility, it is for industry—especially Circularity Scotland—to procure the infrastructure that will be needed to run the DRS. It would not be appropriate for me to influence those discussions. However, I note that we anticipate that the implementation and operation of the deposit return scheme will generate a range of employment opportunities in the extensive infrastructure and logistics that the scheme requires—for example, in sorting and bulking centres. Our ambition is also for polyethylene terephthalate—PET—plastic that is collected as part of the scheme to be recycled here in Scotland.

Liam Kerr (North East Scotland) (Con)

We have been told that there will be a producer fee. Will the minister release the business case containing all costs for calculating the fee? Will she confirm the amount that producers will be charged?

Lorna Slater

Circularity Scotland is a private not-for-profit company. It is common in Europe for the DRS administrator to be set up that way and it is entirely appropriate that any scheme has producer responsibility at its heart. The scheme administrator, in conjunction with industry, will decide on and produce the modelling that generates the fee. It is not for me to decide it.

I remind Liam Kerr that, in November 2019, the Scottish Conservatives not only welcomed the fact that industry was leading the scheme, but wanted to go further and allow industry to set the deposit, which we have set at 20 per cent.

Fergus Ewing (Inverness and Nairn) (SNP)

Will the minister meet me and representatives of the Society of Independent Brewers, which represents mostly small craft brewers? Is she aware that those brewers calculate that the average cost of implementing her scheme will be no less than £20,000, much of it payable two and a half to three months in advance of the scheme’s start? Is she also aware that they regard her scheme as so complex—diabolically complex—that they are contemplating abandoning selling some of their ranges in Scotland? What will she do to prevent her scheme from driving those excellent small Scottish brewery businesses out of their own market?

Lorna Slater

I share Fergus Ewing’s concern about small businesses in Scotland and the need to ensure that we support them. It is one of the reasons for the extensive work that we have done to choose what we consider to be an ambitious but workable date for the scheme.

It is important that small businesses are supported during this difficult time. The business case for the deposit return scheme rests on the principle of producer responsibility: the principle that those who produce the waste that is littered on our beaches and in our parks play their part in ensuring that it can be cleaned up and prevented. That is the scheme’s primary purpose.

I have read and responded to letters from small breweries and the brewing industry and am doing the best that I can to support them and Circularity Scotland to implement the scheme successfully and ensure that Scotland’s businesses can thrive.

Mercedes Villalba (North East Scotland) (Lab)

My colleague Colin Smyth has already outlined the significant cost to local government and the environment that will be caused by the delay. Someone has to pay for the cost of it. The minister is aware that the DRS is supposed to be a producer-responsibility scheme, so will she tell us what steps the Scottish Government is taking to ensure that producers, not taxpayers and local authorities, will foot the bill for the 13-month delay?

Lorna Slater

I appreciate Mercedes Villalba bringing that question back; I was unable to answer it the other day.

As I have said, we are still in the middle of the Covid pandemic, and we are still dealing with the after-effects of Brexit. We absolutely want the producers and retailers that Mercedes Villalba mentioned to take responsibility, but we also have to be aware that they are struggling in the pandemic and with Brexit. I do not think that it is right to suggest that an additional financial penalty should be inflicted on Scotland’s small breweries, hospitality businesses and Convenience stores for delays that are due to Brexit and Covid, and which are in no way the fault of those businesses.

We will implement the ambitious scheme as quickly as we practicably can, and that will reduce the waste and litter on our beaches. What Mercedes Villalba proposes would essentially amount to introducing an extended producer responsibility scheme. That will be rolled out in the UK in the years ahead. Currently, Scotland does not have the powers to roll out an extended producer responsibility scheme on its own. We are working with the UK Government to do that for the four nations, and we will work on that going forward.

Kenneth Gibson (Cunninghame North) (SNP)

A major wine distributor in my constituency with more than 50 employees—there would have been more than 70 without Brexit—has expressed a number of concerns about the deposit return scheme, including about labelling. Different labels will have to be applied for each of the four UK home nations. Thousands of lines mean a hugely bureaucratic and expensive task. It has been estimated that that will cost a quarter to a half of company profits in a sector that operates on 3 per cent margins. How will that be overcome? Are discussions on-going to ensure a four-nations approach, not least regarding labelling?

Lorna Slater

There is no requirement in the regulations for producers to adopt a specific label as a means of preventing fraud. That is a matter for the producers and the scheme administrator to decide, based on technical and commercial considerations. A number of existing schemes around the world provide flexibility, for instance by allowing smaller producers not to use a distinct label but to pay a slightly higher contribution towards the running costs of the scheme instead. I understand that Circularity Scotland Ltd, as the scheme administrator, intends to adopt that model.

On the point about a four-nations approach, we are absolutely open to working with the other UK Administrations on ensuring that our schemes are compatible, but that would have to be on the basis of protecting the ambition level of Scotland’s DRS. I am very excited that Scotland is going first and that it will be the first nation in the UK to implement a deposit return scheme. I very much hope that the rest of the UK will follow in our footsteps and implement equally ambitious schemes. That would make things smoother to administer throughout the UK.

Liam McArthur (Orkney Islands) (LD)

I apologise to the Presiding Officer and the minister for being slightly late to the chamber.

I congratulate the minister on a laudable effort at dressing up an embarrassing failure as some sort of triumph. She has suggested that a scheme will be in place in Orkney from November next year. Can she confirm whether that scheme will cover all the islands or just Orkney Mainland? Is she confident that all the outstanding questions that businesses and community groups in my constituency still have will have been answered well before then?

Lorna Slater

The scheme in Orkney will be a community scheme that will be in place in one town, I believe. That will allow people to get their deposit and donate it to charity. That will not only allow the people in Orkney to interact with the scheme, return their bottles and reduce waste and litter there; it will also give us good data on how people interact with the scheme, which will help us to implement it.

Fiona Hyslop (Linlithgow) (SNP)

Is the minister aware that the Aldi store in Bathgate, which is in my constituency, has already begun a deposit return scheme trial, in which it asks for bottles and cans in exchange for vouchers for the store, and that it plans to use the feedback from customers who use the service to inform plans as it prepares for the deposit return scheme roll-out in Scotland? What support can the Scottish Government offer businesses that want to trial the scheme prior to the Government’s official launch date so that, as well as boosting local economies earlier, the schemes can start up faster and go further when the time comes?

Lorna Slater

I am delighted that Aldi has started that trial. From discussions that I have had with it, I know that it is planning more. That shows the enthusiasm that retailers around Scotland have for the project. I absolutely welcome their support.

As Fiona Hyslop has pointed out, there is much for the supermarkets to learn from trialling DRS as they prepare for the mass roll-out of the deposit return scheme infrastructure. There is evidently a great commercial opportunity for retailers to lead the way in promoting recycling and encouraging footfall. However, from discussions with retailers, I also appreciate that there might be a cost. We are working with retailers to understand how we might support the earlier and faster roll-out of return schemes in advance of full implementation, including logistical support. From engagement with retailers, we know that a firm, final and deliverable full implementation date is the key prerequisite for that, and today’s announcement provides that for them.

Mark Ruskell (Mid Scotland and Fife) (Green)

It is clear that Scotland’s DRS will be a game changer and, while I share the minister’s frustration about the pandemic and Brexit delays, I welcome the fact that the scope of the scheme remains one of the most ambitious in the world, despite industry pressure to dilute it. That means that far more bottles will be recycled, including glass and containers bought online. I understand that the Westminster Government is developing a scheme for England, but it is some years behind Scotland. Will that scheme follow Scotland’s lead in its scope?

Lorna Slater

The scope of the English scheme will be a matter for the UK Government to decide. However, Scotland will be the first country in the UK to have a deposit return scheme and I hope that our level of ambition will inspire the other Governments to follow suit. We should not forget that the scope of the scheme that we are introducing here is ambitious relative to many of the schemes elsewhere that we often hear about. For example, Latvia’s and Lithuania’s schemes include many exemptions. Our DRS will be among the most environmentally ambitious and accessible in Europe, and the inclusion of glass, which will deliver significant environmental benefits and reduce litter, is a key part of that.

Dean Lockhart (Mid Scotland and Fife) (Con)

Last week in the Net Zero, Energy and Transport Committee, Jim Fox of Food and Drink Scotland told the committee that some parts of the industry are ready to go, but others are not. Given the time delay, I assume that the minister has done a lot of analysis in that area. Will she therefore tell us what percentage of industry and what sub-sectors of industry are not ready for DRS?

Lorna Slater

The question is more about big retailers versus small businesses. I do not have the specific numbers for the member, but I can write to him with them. The member might be referring to quotes that were made by Coca-Cola in 2019, before the impacts of the pandemic were known. Big players have sufficient resources to implement their part of the system in a shorter period of time, but we also need to think about small producers, Convenience stores and hospitality businesses, which have suffered so much in the past 18 months. It is essential that the whole scheme is a success and that we bring along all the necessary businesses, not just in the short term but for decades to come. That is why I maintain that 16 August 2023 is a workable but ambitious date for Scotland’s deposit return scheme.

The Deputy Presiding Officer

Clare Adamson is joining us remotely, and I will squeeze in Craig Hoy if he is very brief.

Clare Adamson (Motherwell and Wishaw) (SNP)

I was lucky enough to be at Glencairn primary school in Motherwell in 2018 when the minister launched the deposit return scheme consultation. On that day, the pupils were showing their collective work on reducing plastic waste and eliminating single-use plastic in their school. As some of them will now be teenagers at the launch date, what is the Scottish Government doing to engage young people and encourage their continued support for and participation in the circular economy?

Lorna Slater

During the 26th United Nations climate change conference of the parties—COP26—I was lucky enough to meet some schoolchildren who talked about wanting to implement their own deposit return scheme at their school. I challenged them to a race. If they can get theirs done before mine, I will come and congratulate them on doing so.

I agree that engaging with young people will be essential. Indeed, we know from other international schemes, such as the one in Sweden, that there is a link between reaching out to young people and the overall success of the scheme. The approach will be developed as part of the public awareness-raising campaign, and it will be informed by Zero Waste Scotland’s research into the attitudes of younger people to DRS and the best channels through which to reach them with the information.

As I said earlier, the public awareness campaign will be launched in August 2022, which is one year before full implementation of the scheme.

Craig Hoy (South Scotland) (Con)

Given that the necessary funding is still not in place, and that Circularity Scotland lacks a full board and has neither a permanent chief executive officer nor a chief finance officer, can the minister say on what day, in what week, and in what month she decided to delay the scheme?

Lorna Slater

I am sorry—could the member repeat the question? I am not sure how it links with what he said first.

The Deputy Presiding Officer

Minister, it is for me to direct this—

Lorna Slater

Sorry.

The Deputy Presiding Officer

In the circumstances, Mr Hoy, will you please repeat your question?

Craig Hoy

Will the minister tell the Parliament on which day, of which week, of which month, she decided to delay the scheme?

Lorna Slater

Sorry—I am not quite clear about the question. We have been working for many weeks to figure out how to implement the scheme on the quickest possible schedule. We knew from the gateway review—a third-party, independent review—that, as I said in my statement, July 2022 was not feasible; the review suggested that July to September 2023 would be more feasible. Since then, we have been doing the groundwork to consider the most feasible date, which I announced today: 16 August 2023.