With the political fallout from last Thursday’s referendum result still reverberating around the corridors of power, spare a thought for the implications on our sector of the vote to exit the EU. Opinion prior to the vote veered more in the direction of remaining than to leave. With the die cast, what is the prognosis for the future?
First off, providing waste management services to 65 million people makes the UK a big and attractive market by any standard, especially for front-line services such as waste collection and downstream primary processing. As far as recycling goes, we currently export about 50% of what we collect as recyclate, half to the EU and half into non-EU markets that we have been developing in any event. As far as our other significant waste-related export goes – RDF – the market has always been seen as existing for the short to medium term. Beyond that, our sector has argued for a domestic policy fix if we are to continue diverting the tens of millions of tonnes of waste we send to landfill.
If continued unfettered access to the EU internal market is judged to be important, the UK has the option of joining the European Economic Area. But this comes at a price. EU waste-related law will still apply, but without UK representation or voting rights on its institutions and legislative bodies. Politically more difficult to square-off against the promises of the Brexiteers, free movement and a contribution to the EU budget might have to be conceded.
Free-trade
The second option is for the UK to negotiate a free-trade agreement with the EU. In the case of Switzerland this has gravitated towards voluntary alignment of Swiss legislation with the EU in order to facilitate cross-border trade. Here again, while we may pick and choose which bits of EU waste legislation we wish to replicate in UK law, we will have no say in framing them, other than in a consultative capacity.
The remaining option is for the UK to plough its own furrow, in which case we face the task of pressing the reset button on virtually every piece of legislation under which our sector currently operates. Will the rules for procurement of waste services change? Will Teckal-type companies be allowed? What about VAT exemptions enjoyed by public sector service providers? Do we retain the various definitions in Directive 2008/98/EC? The future legal status of separate collection and TEEP? Would it be better to mirror EU technical directives in UK legislation so that exports and imports of waste to facilities of equivalent status can continue? The legal status of BREF notes? Transfrontier regulations? What about EU producer responsibility legislation, such as the packaging, WEEE, batteries and ELV Directives? How do we push for product changes if the Ecodesign Directive no longer applies to us? These are just some of the detailed issues we will have to consider, keeping in mind that even if we were out, trade with the EU will entail the UK having to abide by relevant EU legislation.
Policy
It is perhaps in the area of policy where we will be most exposed. The “stepping back”, semi-detached stance of Defra over the past several years has dismayed UK waste-watchers, though many in government will no doubt be relieved that the EU 2020 recycling targets are now all but irrelevant, that we need not worry about the pesky 2030 targets proposed by the Commission, and that our market-based PRN system is safe from the insistence on full cost recovery. But removing these external pressure points, together with public sector budgetary cuts, is likely only to further exacerbate the policy vacuum that we have been complaining about. Even with the UK fully within the EU and with EU Directives and resource policies substituting for their absence in UK strategic thinking, there were measures we wanted the UK (more precisely, England) to take to future-proof our sector against the likes of commodity price volatility, competition from virgin raw materials, etc, and to support the circular business models we are developing.
Strategy
Indeed, we might even have lost the art of making strategy. Apart from a world-class regulatory set-up and landfill tax legislation enacted in the 1990s, one would be hard-pressed to find a significant policy initiative translated into legislation after the Control of Pollution Act 1974, despite desultory attempts at strategy development every few years. The Environment Select Committee’s comments in 2001, that the UK’s waste strategy lacked ambition and imagination, and that we were “merely responding to the thrust of policy at European level without a concept of where the UK should be heading”, still applies today. But beggars can’t be choosers. It is EU legislation that has got us this far, even if it was unthinkingly applied. Take away the “thrust of policy at European level”, and the UK’s policy locker for waste and resources looks even more bare.
Why is this important? Because our sector has embarked on a journey that is all but irreversible. There is no going back to the days of wholesale landfilling or incineration. Waste management has had an industrial revolution of its own, and customer expectations have also changed. We now make products for which we are increasingly dependent on domestic and external end-markets. Innovative thinking and new investment is needed as we move further up the value chain.
Vision
So while there is still an awful lot to play for and the normal cut and thrust of business will of course continue, what is at stake is a vision for our sector. We need a home-grown, forward-looking strategic framework for waste and resource management, if the UK is to extract in full measure the economic benefits we are capable of delivering. Our sector has significant new investment waiting in the wings, which will need protection from current market failures through appropriate policy responses. These failures will not go away even if the UK remained in the European single market.
Our immediate call is for Defra to muster the resources and focus on our sector properly to represent us in the negotiations with the EU. It would behove us to work with Defra and jointly take forward a vision as to where and how we want to take our sector forward in light of Thursday’s vote.
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