Austerity was on the agenda at the LARAC conference last week as panellists discussed new ways of funding services.
The debate was led by Claire Brailsford, chair of the National Association of Waste Disposal Officers (NAWDO) and the panellists were: Simon Bussell, development director at Veolia; Duncan Simpson, director of sales and marketing at Valpak; Emma Tilbrook of consultants, Eunomia; and Joshua Burke, research fellow at Policy Exchange.
The panellists discussed the options authorities have to fund their services, from charging to setting up Teckal-exempt companies. Panellists also debated the financial impact of the Circular Economy Package.
Dominating the discussion was the option for local authorities to charge for certain services and generate income.
Reflecting on this theme from a “contracting” side, delegates heard from Simon Bussell who said that the company now “rarely saw a tender where garden waste is free” and that Veolia was seeing more and more a move to local authorities paying for a core of services and increasingly “the householder is being expected to pay for those discretionary services”.
However, Emma Tilbrook, warned local authorities that “just by introducing a charge for a service does not actually mean it will generate income”.
She emphasised that local authorities need to understand what the whole service costs, in order to understand where there are opportunities to create a source of income.
Mr Bussell also brought attention to prudential borrowing with Veolia seeing “more authorities looking at prudential borrowing, mainly for vehicles and some for containers”.
He argued that borrowing can “deliver – depending on the capital intensity of the project – savings on a municipal contract between 2% or 3% or up to 5%.
“On the treatment side, if we are looking at significant energy recovery facilities or recycling infrastructure, you are looking at potentially 10% to 15% of a cost reduction.”
Mr Bussell added that if you combine prudential borrowing with partnerships that “can deliver operational synergies” which could provide authorities with another set of financial benefits.
The Veolia development director also said that he noticed that councils were increasingly requiring them to “take on more in the way of commercialisation, and how we can generate additional revenue”.
“Whether we are talking about income from the sale of recyclates, or income from workshops being outsourced, or electricity or district heating, this has become essential to how we price for future contracts,” added Mr Bussell.
But, he cautioned local authorities about overall not expecting “too much from commercialisation”.
Ms Tilbrook, who has also worked for Hounslow London borough council on secondment from Eunomia as mobilisation manager, also spoke to the audience about the importance of cleverer and innovative contractual mechanisms which would allow for more flexibility.
“It is about understanding that where we are now is not the point where you might want to be in seven or ten years’ time. We need to set contracts that recognise that things are going to have to change,” said Ms Tilbrook.
Ms Tilbrook also called on councils to take a closer look at partnerships between local authorities.
She highlighted that partnerships can help authorities gain better buying power in the market, explaining that Eunomia has seen a “massive disparity in the amount of income local authorities are getting for their materials on a per tonne basis”.
The consultant indicated that this could be due to a lack of expertise in-house, asking: “Is there an opportunity for local authorities to work more collaboratively to employ someone to broker that material or share some of that expertise and experience?”
The Eunomia consultant also touched on the use of Teckal-exempt companies, which operate at arm’s length from local authorities.
She emphasised that they can help authorities gain better transparency in terms of what their services actually cost.
But the consultant continued: “It is important to remember that just because you are thinking about delivering the service with a different funding mechanism or different contractual relationship, that does not necessarily mean that there is one golden bullet which will answer that question of how to fund services.”
Ms Tilbrook concluded that authorities should seek a solution that is right for them, while learning from other experiences of other authorities.
Another key feature of the debate was the development of producer responsibility measures in the UK.
Duncan Simpson discussed the role of extended producer responsibility and presented the findings of the ‘PackFlow 2025’ commissioned by Valpak which looked at whether the Circular Economy Package’s proposed packaging targets are achievable.
The study looked at systems in other European countries in order to look at options for the design of a system going forward from 2020.
Mr Simpson explained that the report had suggested four ways forward for the UK’s packaging waste system after 2020, three of which are an evolution of the existing system and the fourth being a complete overhaul of the current system with a European-style full net cost system.
The Valpak director emphasised that the study showed that communication funds would be a major feature of options two, three and four, as an effective way to influence behaviour.
Speaking from a policy perspective, Joshua Burke concluded the debate by talking about the financial implications of the European Union’s circular economy package.
He questioned whether the package “appreciates the UK context”, as the package was predicated on high recycling rates but that the economics of recycling has “deteriorated” in the UK due to changes in commodity prices.
Mr Burke questioned whether it is “cost effective” to adopt the package’s proposed high recycling targets and whether the UK should instead focus on reducing and reusing waste as a cost effective means of achieving environmental benefits.