The Leader of the House of Commons ():...I gently say to the hon.
Lady ( (Edinburgh North and Leith)
(SNP)) that I hope we all share those aims in this place, but how
we go about doing things is also rather important. The complaints
that not just Conservative MPs and MSPs have about how the
Scottish Government have been going about this, and the concerns
that have been raised by many coastal communities, are because
the Scottish Government do not consult and do not listen to those
communities. It is the same story with their disastrous bottle
Deposit
return scheme, which will impact negatively on recycling
rates and cause massive problems for businesses...
Extract from Committee
stage (Commons) of the Finance (No. 2) Bill
Clause 314
Deposit schemes
Question proposed, That the clause stand part of the Bill.
Clause 314 makes changes to the Value Added Tax Act 1994. Those
changes will enable further secondary legislation designed to
ensure that businesses only account for VAT on the price actually
paid for bottles or drinks containers covered by Deposit return schemes.
Such schemes are being introduced across the UK to encourage the
recycling of containers, and under existing law VAT is due on the
full price paid for a drink, including any deposit.
Existing rules do not permit VAT adjustments for deposit scheme
refunds. That means that under the current law VAT would be
collected on drink deposits, even though they have been refunded.
We do not want that to happen, because we want to support the
environmental aspirations of such measures. The changes made by
clause 314 will address that, by removing the need to account for
VAT on the deposit amount when it is charged. The new rules will
require VAT to be accounted for only on unreturned deposits.
To avoid complexity for both consumers and businesses, only the
business that makes the first sale of the drink with a deposit
will be required to account for VAT on unreturned deposits. What
that means in practice is that producers and importers will be
the ones liable to account for it on their VAT returns. We have
tried to protect both consumers and small shops—corner shops,
newsagents and the like—from having to deal with any VAT
complexity from the measure. When drinks containers are returned,
they will be scanned, and the consumers will receive a refund of
the deposit. It will not touch them; they will get the money back
that they put forward. Information on numbers of returned
products will be collected and passed to the business that made
the first sale of the product on which a deposit was charged.
11.45am
The clause provides the commissioners of His Majesty’s Revenue
and Customs with a power to designate which deposit schemes are
covered by the clause, to ensure that the special VAT accounting
rules apply only to official Government deposit schemes,
including those under discussion at the moment in Scotland.
Consumers will not be affected by the VAT accounting, as they
will pay a fixed deposit. If they return a container, they will
receive the same amount back. I urge that the clause stand part
of the Bill.
As we have heard, the clause introduces rules for VAT accounting
for Deposit return schemes.
As the Minister set out, it means that when making sales within
the scope of the relevant deposit scheme, no VAT will be charged
in relation to the deposit amount. However, VAT on unreturned
deposit amounts will be paid by the first seller of a deposit
scheme product.
We recognise that, under existing legislation, Deposit return schemes
may be introduced across the UK, and we recognise that the clause
helps to facilitate the operation of such schemes by introducing
VAT accounting rules. The clause ensures that no VAT will be
charged at any point in the supply chain in relation to the
deposit element of the price for a deposit scheme product. There
will only be a requirement to account for VAT where suppliers
make the first sale of standard-rated deposit scheme products
that include a deposit amount.
More widely, we have been disappointed by the delays in the
introduction of a Deposit return scheme.
It was only after multiple consultations that the Government
finally announced in January 2023 that they would introduce
a Deposit return scheme
for plastic and cans, but not for glass, in England, Wales and
Northern Ireland from 2025. We will not oppose the clause.
Indeed, we want to see a Deposit return scheme
introduced as soon as possible, so I would be grateful if the
Minister could use this opportunity to confirm whether the
Government are still committed to introducing one in England,
Wales and Northern Ireland by 2025.
Dame
Obviously, the VAT rules account for some of the most complex
parts of the duties and excise that the Minister has to wrestle
with on a day-to-day basis. When one talks to businesses of all
sizes, often one of the biggest complaints is about the
complexity of the VAT rules. Given how much revenue VAT brings in
and how all-encompassing it is, perhaps that is not surprising,
but I wonder whether the Minister is happy with increased
complexity that the changes bring. Perhaps she could give us a
flavour of her thoughts and considerations in dealing with the
issue of deposit schemes and the complexity of the VAT rules.
Given that VAT will be levied only on the first seller, the
Minister has clearly tried to make the rules as simple as
possible. But how much complexity does she think the clause will
introduce, given that it will be applicable to plastic and
cans—presumably aluminium—both of which are easily recyclable,
but not to glass? I assume that she is not introducing glass
straight away because of the sheer number of glass bottles and
the size of the task. Again, perhaps she could give us a flavour
of the thinking behind excluding glass, and tell us whether the
intention is to include it at a later stage. How complex does she
think doing that might be?
I am old enough, as I am sure—I am going to put this politely—you
are, Mr Stringer, to remember when we had Deposit
return schemes for glass, long before anyone thought about
digitally scanning anything or any of the computer-based
structures that I assume will facilitate the VAT inspectors’
task. Perhaps the Minister could give us some indication of that.
Again, how much revenue does she think will have to be
forgone?
What assumptions have His Majesty’s Revenue and Customs and the
tax inspectors made about the actual cost of schemes such as this
in revenue forgone? Clearly, the idea—to incentivise good
behaviour that will assist in increasing recycling—is one we
would all support. We all want that to work, but if it is not
done properly, it could be an enormous fiddling thing that does
not really have much effect at all. All of us would applaud the
decision not to impact the customer and, clearly, we want to see
the containers for recycling brought back.
Can the Minister say a little about whether she has considered
how the scheme might interact with the packaging regulations?
Again, they are a moveable feast, given that we have left the EU
and they have had to be changed as well, but there is clearly a
direct connection between the two. We must make certain that the
way the packaging regulations work increases, if possible, the
incentive for the recycling to work.
There is also the landfill tax, which might have an impact on
behaviour. I am sure that the Minister has had a towel on her
head thinking all that through to try to make certain that it
works as intended. It is currently due to come into effect in
2025. Given the complexity, is she confident that that will
happen, given that there have already been delays and the scheme
itself is now smaller than most people want it to be, because it
excludes glass?
Given the complexity of VAT—when it must be done, when the
returns must be made and how difficult that can be for
businesses—does the Minister think that moving on without a set
timescale, and the uncertainty created by that, give the best
background for a successful introduction? The delivery of the
scheme in Scotland seems to have run into trouble. I do not know
whether the hon. Member for Dunfermline and West Fife has
insights that he can share with us—it is almost as late as a
TransPennine Express train.
I am interested in what the Minister has to say about some of my
questions. The scheme might seem to be a fiddling little thing,
but it fiddles with a very complex tax and interacts with many
other things. A bit more insight into the Minister’s thinking and
her confidence about whether the scheme can be delivered on time
would be really welcome.
I will take the towel off my head before I reply. There have been
difficulties in Scotland with the implementation of
the Deposit return scheme.
In general, I am reading that this is a simplification, and it
maybe brings a bit of clarity to what is possible in a DMS
scheme. The important point is that, as pointed out by the
previous speakers, it would be fantastic if we could operate
across the whole UK. It is not often I say that, but there are
opportunities with such a big environmental project that we could
all share in.
Although this is not for debate as part of the Finance Bill, I
hope that the Minister will take the opportunity to listen to
some of the comments made and see whether we can work with other
Departments—and Wales, Northern Ireland and Scotland—to see what
combinations can be brought to bear. I notice that the Nordic
Council, for example, had a discussion session not so long ago
where it talked about operating almost a Scandi food waste
policy, which would cover all the various countries in the Nordic
Council. I do not see why we cannot be working in a positive way
like that across the whole UK, albeit that we in the SNP have
other ambitions to take our country in a slightly different
direction.
Clearly, this is a complex piece of work that has taken a great
deal of time, but I get the sense that the Government may be
kicking the proverbial recyclable can down the road. Taking it
piecemeal without a comprehensive view across the whole UK does
not seem to be the best approach. Could the Minister speak to
that?
On the last point, I gently redirect the hon. Member’s
observation about a piecemeal approach. That is probably more for
the Scottish Government to answer because we would very much like
to be acting in tandem. By the way, I am responsible for only the
VAT elements, so questions about the wider design of the scheme,
including whether glass is included, must be directed to the
Department for Environment, Food and Rural Affairs.
I have been holding that wet towel over my head at night thinking
about this. For example, what happens if somebody buys their
bottle of drink just north of the border, pops over to visit
Newcastle for the day and wants to get rid of that bottle? There
are practical considerations. With some of this—and the Scottish
Government are in this position as well—we will have to see how
consumers behave. I hope that the scheme will be an enormous
success and that the producers will pay the VAT on returned
bottles, but it will take us a bit of time to get used to it.
Would it not be a good idea to have a consistent approach that
the UK Government could get behind? We have had to push on with
our DRS to actually achieve some of our net zero targets and a
better environment for our citizens, so the Government could back
us up on that and bring in their own scheme.
Again, I am trying to be terribly tactful about how I put this.
There has been so much discussion between officials behind the
scenes. Scotland has wanted to run ahead with its scheme.
Frankly, there were some significant intellectual debates about
how VAT is dealt with in this scenario. If the hon. Member—I am
not pressing him because I know this is not his portfolio—or
others in the Scottish Government want a little breathing space
to check that we are all going in the right direction, that is of
course a matter for them.
We are committed to implementing the scheme in 2025, but it will
need a lot of publicising as to the impacts for consumers. We
will all want to encourage our constituents to either use their
own drinking vessels wherever possible or to return their bottles
and cans when they can, but we have tried to simplify the VAT so
that the larger producers will be the target of that first stage
of VAT accounting.
On the complications, as I say, we have tried to simplify the
scheme. One can imagine the scenario where if we were accounting
for VAT at every single stage of the transaction process, that
would be a nightmare for the tiny retail shops that we all care
so much about. That is a good example of two of the three
objectives that I set His Majesty’s Revenue and Customs and the
Treasury to ensure taxes are fair and simple so that there is a
little tension between them, but we have tried to ensure it is as
simple as possible for consumers and smaller businesses.
Just to make it clear, we are not making any money from this
scheme. Indeed, we hope that tiny amounts of VAT will be paid to
us, because that would mean that the overwhelming majority of
people were returning their bottles. I hope we make as little
money out of this as possible, which is perhaps unusual for me to
say.
We will deal with the plastic packaging tax later in the Bill.
The latest figure is just over £200 per tonne. As with the
landfill tax, it will sit alongside this scheme and the whole
point is to, first, cut down on plastic and secondly, make sure
that less of it goes to landfill. I very much hope that people
will see this as a holy trinity of environmental measures to try
and achieve the ends that we are all so keen to achieve. Unless
there are any further takers, I will sit down.
Question put and agreed to.
Clause 314 accordingly ordered to stand part of the Bill.
Extracts from
Westminster Hall debate on Plastic Pollution in the Ocean
(North Devon) (Con):...Yes,
in many ways I agree. I will certainly come on to speak far more
about the global implications of the situation. While we are
doing so much on our own island, we need to do so much more. In
particular, the upcoming Deposit
return scheme, confirmed in the environment improvement
plan, will bring the UK in line with similar nations, and recycle
90% or more of relevant containers...
(North Ayrshire and Arran)
(SNP):...Scotland’s Deposit
return scheme works on the basis of the polluter
pays, a principle that incentivises recycling, reduces litter and
tackles climate change by reducing the amount of plastic going to
landfill or ending up in our oceans. The scheme has been delayed
because the First Minister is very keen to work with business to
get this right. It is in all our interests, even if it is
sometimes tempting to make cheap political points about this
issue. The reality is that it is a fine and noble principle, and
we should all work to make sure that it can do what it says on
the tin. We all need to think about how we use, reuse and dispose
of our plastic, because that is the problem that oceans face
today.
: Would the hon. Lady agree
that, while the Deposit
return scheme systems that are being looked at
across the UK are vital, is it not better—as we are talking about
international efforts—that we all work together to ensure that
the scheme runs across the whole country, rather than having
different schemes in different parts of our own islands, making
it more complex for everyone involved?
: I absolutely agree with
the hon. Lady, but the point is that we cannot all move at the
speed of the slowest caravan. We have to be bold and ambitious in
what we seek our deposit returns scheme to
achieve. What she proposes would be a better way forward, but the
UK Government are slower and less ambitious. That is a pity, but
we cannot be held back by that...
(Putney) (Lab):...Thirdly,
will the Minister give an update on progress towards the Deposit
return scheme? Fourthly, she will know that plastic
packaging accounts for nearly 70% of our plastic waste. When was
the last time the Government sat down with manufacturers and
worked on a road map for eliminating plastic packaging in food
and other products, thereby driving down plastic production?
The Parliamentary Under-Secretary of State for Environment, Food
and Rural Affairs ():...As we have heard from
various colleagues, the key element of our packaging and waste
regime and reforms is the extended producer responsibility
scheme, which puts the onus on the manufacturer that places the
packaging on the market and makes them responsible for its
lifecycle and where it ends up. We also have the Deposit
return scheme, which has been mentioned by a number of
colleagues. It is due to start in October 2025, but intensive
work is being done on both schemes right now...
For context, OPEN HERE
