Budget 2016: A wasted opportunity for the recycling sector?

Written by: Matt Clay | Published:

With the headlines dominated by a new ‘sugar tax’ and the resignation of Iain Duncan Smith, the latest Budget has once again proved fruitful for the nation’s media. What does it mean for the UK’s waste industry? Matt Clay investigates

The 2016 Budget delivered by chancellor George Osborne could be described as a rather sweet and sour affair.

Sweet for health campaigners, with the announcement of a new sugar tax to be introduced on the soft drinks industry, potentially raising £520 million per year for primary school sport.

Yet perhaps more sour for former pensions secretary Iain Duncan Smith, who resigned after the Budget citing pressure to make cuts to disability benefits. The chancellor has since dropped these planned cuts and apologised for the resignation.

At a total of 146 pages long, the 2016 Budget is expectedly lengthy, but raises the common question from the general public: how will it impact me?

In a post-Budget analysis, the Institute for Fiscal Studies (IFS) says the budget left the richest 10% of households on average £260 a year better off, despite Osborne’s announcement to increase the threshold at which the 40p tax rate kicks in.

Meanwhile, according to the IFS, the poorest 10% of households could actually see their net income fall slightly as benefits are reduced.

Tackling waste crime

So far, so much of a traditional Tory Budget – largely benefiting the rich but not the poorer households – so how will it impact the UK waste and recycling sector?

One of the first mentions for the industry in the Budget document was a promise of increased funding to tackle waste crime.

The Budget states: “The government will increase HMRC compliance activity to tackle tax evasion and non-compliance across the waste supply chain – waste-related crime is a blight on communities and undermines the environmental objectives of landfill tax. This is why HMRC and the Environment Agency are already working together to tackle fraud and tax evasion in the waste sector. The government will provide additional funding for HMRC to increase its compliance activity in this area.”

While the figure for “additional funding” over the next five years was not provided, upon further digging the Budget reveals this would be an additional £5 million between 2017 and 2018.

“Although there is little of any substance in the Budget 2016 to gladden hearts in the UK waste and resource sector, the additional funding over the next five years for HMRC to tackle tax evasion and non-compliance across the waste supply chain is welcome, and confirmation of the Landfill Tax rate regime through to March 2019 provides some medium-term certainty,” says Chris Murphy, deputy chief executive of the Chartered Institution of Wastes Management (CIWM).

Landfill Communities Fund

To help fund the clampdown on waste crime, the Treasury is proposing to take £20 million from the Landfill Communities Fund (LCF).

This tax credit system enables landfill operators to contribute money to environmental bodies enrolled with ENTRUST, the scheme’s regulator, to carry out local community and biodiversity projects.

To date, the fund has supported more than 50,000 community and environmental projects across the UK with funds totalling £1.2 billion.

It was a year ago, in the 2015 Budget, when the government announced reforms to the LCF, including “simplification of record-keeping requirements and changes to the scheme’s objectives”.

Ahead of the 2016 Budget, there was a fear that an option of using third-party contributions under the LCF to meet a £4 million shortfall would be removed. The Environmental Services Association (ESA) urged the Treasury to retain this option.

Jacob Hayler, executive director of the ESA, warns: “If HM Treasury proceeds with the previously proposed change to third-party contributions, it would be catastrophic for the scheme. This vital funding source for local projects would be potentially jeopardised, while jobs at the administering environmental bodies would also be at stake.

“Bringing in these changes now would provide landfill operators with little time to budget, particularly when their planning timescales tend to be around five years in advance and when some individual operators are facing unforeseen annual costs of almost £1 million.”

Luckily for the ESA and landfill operators alike, it seemed the chancellor must have listened to the advice, in between telling off the Top Gear team for apparent noisy filming in London.

Speaking after the Budget, Hayler says: “ESA is pleased that HM Treasury has listened to the industry and chosen to retain the option of using contributing third parties under the Landfill Communities Fund scheme. Removal of this option would have stung landfill operators with a sudden and unforeseen £4 million burden, which would have left them with no option but to cease contributing to the fund.

“This would have been a crying shame for local community and biodiversity projects which rely on this source of funding in an otherwise challenging climate for fundraising, and also for the environmental bodies administering the scheme, which would have been forced to wind down and lay off jobs.”

The Budget also states that the standard and lower rates of Landfill Tax will increase in line with the retail price index, rounded to the nearest five pence, from 1 April 2017 and again from 1 April 2018.

Packaging

As well as industry crime and landfill tax, other waste headlines in the Budget include packaging recycling.

The government confirmed a plan to amend packaging recycling targets for plastic and glass, which is expected to “reduce the burden on business”. The new targets will be set for 2018, 2019 and 2020.

For plastic, the existing target of 52% for 2016 will be reduced to 49% and then increased by 2% each year to 2020, to 57%.

For glass, the existing target of 77% will be maintained until 2017 and then increased by 1% each year to 2020, to 80%.

Commenting on the packaging changes, CIWM’s Murphy says: “The expected changes to plastic and glass packaging targets appear pragmatic and likely to ensure that the UK performance is more closely aligned with the new EU Circular Economy [Package].”

Despite the revised packaging targets, Murphy believes the wider Budget won’t benefit the industry.

“In terms of providing a coherent framework to support green economic growth, however, the chancellor has once again turned our sector away empty-handed,” he mourns.

Anaerobic digestion and renewables

Ahead of the budget, the Anaerobic Digestion and Bio resources Association (ADBA) reached out to the chancellor to address the feed-in tariff cap for anaerobic digestion (AD).

Charlotte Morton, chief executive of ADBA, says: “With this year’s feed-in tariff cap for anaerobic digestion almost full already,

it’s time for the chancellor to commit more resources to delivering viable baseload capacity through AD to secure our

electricity supplies.

“In addition, industry urges the chancellor to recognise the Committee on Climate Change’s recommendations in their fifth carbon budget, which urge action to support on-farm AD and divert biodegradable waste from landfill if the UK is to meet its carbon targets. Centrally driven support for separate food waste collection schemes will be an especially important step towards developing a thriving UK circular economy.”

However, the Budget was extremely quiet on the topics of biowaste and AD.

The government said that it would

auction contracts for difference of up to

£730 million this parliament for up to four gigawatts of offshore wind and other “less established renewables”, with a first auction of £290 million”.

Philip Simpson, commercial director of ReFood, says the Budget is “another signal that the environment and renewable energy is far from the top of this government’s agenda. It was thoroughly disappointing to see that renewable energy generators are hit once more as the chancellor announces rises to the Climate Change Levy, which became applicable to such businesses for the first time in 2015.

“To compound this, there have been further tax breaks offered to the oil and gas industry, demonstrating ongoing subsidy support to the fossil fuel sector,” continues Simpson.

“Adding salt to the wound, the renewable energy industry continues to be decimated by the ongoing policy uncertainty and swathing subsidy cuts around RHI, FiTs, etc.”

The commercial director adds: “While £730 million of funding for new renewable energy projects can be welcomed, it is really only a drop in the ocean; this isn’t enough to allow the sector to really achieve its potential.”

Running out of fuel

Others believe the government could fall short on its plan for decarbonisation.

Matthew Spencer, director of Green Alliance, says “it’s fantastic” that the “prime minister put us on the road to a largely carbon-free energy system by 2030, but the chancellor hasn’t put enough fuel in the tank to get us there. Funding less than 1GW a year of offshore wind in the 2020s, with nothing

for mature renewables, will leave a big gap

in power generation, however fast we

pursue nuclear and gas.

“This is another example of the government being strong on climate targets and weak on driving the necessary investment,” continued the Green Alliance director.

The waste and recycling industries rarely make major headlines from the annual Budget. The chancellor’s juggling act of nipping and tucking the figures between education, healthcare, pensions, the environment and others like a financial surgeon to balance the books is a mammoth task.

Overall, the industry came away disappointed yet unscathed, with clarification on the Landfill Community Fund that will
no doubt alleviate worry from landfill operators. RWW


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