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Producer Responsibility Obligations (Packaging Waste) Regulations 1997 (As amended)

APPENDIX ONE

Advice from the Advisory Committee on Packaging, June 2003

10 June 2003

The Rt. Hon Mr Michael Meacher MP
Minister for the Environment
Department for The Environment, Food &Rural Affairs,
Nobel House,
17 Smith Square
London SW1P3 JR

Dear Minister

Packaging Regulations

I attach the Advisory Committee's report on the examination of several key issues associated with the Packaging Regulations. The Committee and four task forces have been looking at these matters in line with our terms of reference and with a view to improving the operation of the current Regulations. I know that it is the intention of Defra to issue a consultation document on revisions to the Regulations shortly and I trust that our advice will be taken into account where appropriate.

Good progress has been made over the last few years, but with new targets expected in a new Packaging Waste Directive we need to lift our performance to a different level. We will have to recover and recycle more than 1 million additional tonnes of packaging per year over the next few years and this will be a stiff challenge. It is essential therefore to give clear signals to all participants about what will be required up to at least the year 2008. This will encourage longer term planning. It is clear that the cost of meeting the new targets will increase substantially from where we are now and some businesses and sectors may find this a particular challenge.

Much of the additional material will have to come from the domestic waste stream and unless many more local authorities move into separate or co-collection of all packaging materials and we make best use of those already in operation, the UK will not meet its targets. There needs to be some new thinking not only on the funding of these activities but also new approaches to economies of scale to keep the costs to a minimum. Urgent action in this area is essential.

The Committee believes that there needs to be a rapid improvement in the co-ordination of these activities and much more alignment between the objectives of Government, Local Authorities and Industry. Deployment of central funds and the flow of industry funds must be better and more effectively targeted. Additionally, drivers such as significant increases in Landfill tax and charging householders for removal of waste must be progressed. We believe that some form of co-ordinating body should be established to drive this with emphasis on the packaging issue.

It is clear that there is still a considerable amount of un obligated packaging below the deminimis levels currently set. This was examined in some detail but it is a complex area. What is clear is that, in addition to the problem of the significant amount of packaging below the thresholds, there are still companies ignoring these Regulations and so free riding also continues to be an issue. Industry continues to be very concerned about this as those obligated businesses paying their fair share are having to bear the extra burden of those who are not. The Committee thinks that a special task force should be established, led by the Government and including the Environment Agency and industry, to look into how to address and overcome the problem.

The Committee has made a number of suggestions on how to tighten up the Regulations and it is important that industry sees this happening. The question of fraudulent activity has been raised before and I know that you have set in hand actions to look at one particular area. We believe that steps must be taken to prevent this apparent misuse of the system. This will mean more work for the Agencies but if we are to be successful in achieving real increases in packaging waste recycling, it is essential for the necessary steps to be taken. The extra resources will have to be funded principally by reprocessors and it is important that deployment of Agency funds is transparent and focussed. The Agencies need the additional powers, through the revisions suggested, to implement the regulations and to tighten up the system so that damaging slack in the market is not encouraged.

We have also discussed ways of making compliance schemes more accountable as they have a big responsibility to bear in delivering a successful result. There is a strong view that all obligated business should be members of compliance schemes to give the whole management of the process much sharper focus. There are still many companies individually registered with the Agencies and this is seen as a diversion of their effort.

Improving the handling of data is key to managing the UK system and we should quickly move to an online system. This means commitment to this objective by all the parties and work should commence immediately with this principle in mind.

Finally industry like central government must see that its funds are being used to best effect and the demands on those involved in the supply chain should be increased through better business plans. Looking at the management issues as a whole will be an essential ingredient for success. How best to co-ordinate the activities of industry, government departments and the activities of the agencies is a challenge that needs to be addressed.

I very much appreciate the support given by members of your Department, the Agencies, the DTI, the devolved administrations and industry. Everyone has been positive and has given freely of their time.

We do have a chance to succeed but it means everyone working with a common purpose backed by revised regulations and properly resourced and targeted activities by the Environment Agencies. I look forward to discussing these matters further with you. I have sent a copy of this letter and the report to The Ministers in the devolved administrations.

Yours sincerely
John C Turner
Chairman Advisory Committee on Packaging

The Recommendations
of
The Advisory Committee on Packaging- June 2003

Executive summary

Following the initial meeting of the ACP in October 2002, four Task Forces were set up to examine the following areas:

• The de minimis thresholds.

• Targets and Infrastructure

• Enforcement

• Data

The key points to emerge are summarised below. They are expanded in the main body of the report.

1.0 De Minimis

2.0 Targets and Infrastructure

Targets:

2.1 National and Business targets should be set up to 2008 in accordance with the attached table at Appendix A.

2.2 Business targets should be set to ensure the achievement of National targets. However, there is a strong view from industry that the difference between the two should be limited to 10%. (i.e. 66% Business target to deliver a 60% National target)

2.3 Further investigation of wood and aluminium data statistics is urgently required.

2.4 Introduction of a combined ' metals' target should be considered to give business a better chance of meeting national targets.

Infrastructure:

2.5 Landfill tax should be increased to 35/tonne as quickly as possible to drive domestic waste recycling, which includes packaging. This will also encourage the increase of lower cost commercial recycling.

2.6 At least 80 additional Local Authorities (LAs) per year must commit to integrated kerbside collection of separated packaging waste, operating on a co-ordinated regional basis.

2.7 If this infrastructure is not seen to develop quickly it is recommended that LA packaging collection targets will be needed to kick-start the process.

2.8 LA packaging diversion performance should be monitored via on-line league tables.

2.9 An independent body should be established to allocate and channel central Government funds and to provide a strategic focus.

2.10 Commercial premises should be required to separate packaging for collection in localities where a collection service exists.

2.11 An immediate study must be set up by Defra to establish best economic solutions for kerbside collection of packaging waste.

2.12 There should be a move towards variable charging for waste collection to provide a consumer incentive to separate dry recyclables.

3.0 Enforcement

3.1 Incorporate PRN/PERN system into Regulations.

3.2 Remove 'alternative evidence' as means of demonstrating compliance.

3.3 Make reprocessor reporting statutory and apply graduated fine system to avoid late / inaccurate returns.

3.4 Accreditation should include 'fit and proper' person test related to performance and adherence to conditions and financial viability.

3.5 Reprocessors should meet the costs of the accreditation process by the payment of annual fees.

3.6 A government-sponsored task force should be set up immediately to focus on the free riders issue to decide how best the agencies should take steps to deal with this issue.

3.7 A nationally consistent business-plan format should be adopted for reprocessors/exporters, compliance schemes and individual registrants. This should focus on the output of additional PRN's.

3.8 Agencies' suspension powers on reprocessors should be strengthened.

3.9 Furnishing false or misleading PRNs / PERNs should be treated as a criminal offence.

3.10 PERNs should have the same level of Agency monitoring as PRNs.

3.11 Improve transparency of audit trail for waste packaging inputs to reprocessors.

3.12 Agencies to ensure adequate levels of resource and expertise are available and to indicate what impact, if any, this would have on the Agency Fee.

3.13 Reprocessors should provide annual PRN / PERN income and spend statement consistent with business plans and be independently audited as part of company financial audit.

3.14 In order to effect better control of obligated producers and to release the Agencies for enforcement duties, the Committee supports a move towards all obligated companies being members of a compliance scheme.

3.15 In support of the above proposal it is felt that further work is needed to derive a realistic sanction to be used against schemes that fail to comply.

4.0 Data

4.1 Revise data form in accordance with example attached at Appendix C.

4.2 Develop on-line registration/reprocessor returns system with UK central data management system in time for use in the 2005 data round.

4.3 The Agencies should take specific steps to make trade associations aware of protocol opportunities.

4.4 Appropriate commercial database calculation packages should be listed in the User's Guide.

4.5 Introduce 'lock' system option for annual data calculation.

4.6 The Task Force recommended that there should be an obligation on businesses to provide data both upstream and downstream. However, the ACP concluded that further work on the implications of such a change is necessary.

4.7 Remove or simplify mid year change requirements.

4.8 Introduce late registration fee.

4.9 Introduce requirement for compliance schemes and directly registered companies to submit quarterly PRN/PERN purchasing returns to the Agencies.

Additional detail

5.0 De minimis

5.1 Following extensive analysis of the de minimis sector it was concluded that the benefits to be gained by simply changing current levels do not justify the additional administrative and enforcement burdens that would result. However the current 1.2 million tonnes gap between reported tonnage and the total of UK packaging flowing into the waste stream can be reduced in part by addressing internal supply and leased packaging. As a result, a worthwhile gain of some 300,000 tonnes might be foreseen and it is recommended that the regulations be strengthened to address this.

5.2 To ensure that costs to obligated companies are kept to a minimum there must be a continued bearing down on free riders. This issue has attracted much attention over the years and there is evidence that companies are still avoiding the Regulations. The occurrence of free riding constantly becomes apparent as, year on year, businesses come forward to register and have clearly been in default for previous years. The evidence about the continuing problem is anecdotal but ad hoc analyses in specific industry sectors have shown how not inconsiderable volumes of obligated tonnage are escaping the net, either through ignorance or by design. Data from compliance schemes suggests that the total 'missing' tonnage could approach 400,000 tonnes. As part of the target-setting exercise it is recommended that a government-sponsored task force be set up closely to examine this issue and to draw up clear advice to the Agencies on how the issue should be tackled. This is an urgent matter.

5.3 For now, business targets should be set on the assumption of no change to de minimis levels but taking into account the gain from including internal supply and leased packaging. However, investigations do indicate that a de minimis change would have a substantial impact and it is believed that further investigation in this area could identify ways of bringing in more obligated tonnage and at the same time releasing some currently obligated companies. It is recommended that further examination be urgently put in hand.

6.0 Targets

6.1 We believe that it is essential to set longer-term targets and in particular up to the year 2008. This is the best signal that can be given to obligated businesses that they must take steps to ensure compliance. This approach will eliminate the need to keep changing targets, with its accompanying extended review process. There is still doubt as to the time span that will be set when the new European targets are fixed, hopefully later this year. Considering the delay caused by deliberations in Brussels, we advise that industry be given sufficient time to achieve the new targets. There is commitment to achieving UK targets but there is a need to achieve this at reasonable cost.

6.2 A schedule of targets showing a forward programme is attached. There are necessarily two sets of targets - National i.e. the level intended to be met nationally each year, and Business i.e. the targets to be used each year by obligated businesses. There has been difficulty in determining what should be the gap between these. There is a strong industry view that the gap should be capped at 10% because obligated businesses need to see their costs maintained at a reasonable level. The un-obligated sector escapes any cost associated with the Packaging Regulations, thereby conveying an additional cost burden to be carried by those that are obligated. The gap between national and business targets exists for several reasons. In particular it is there to compensate for the effect of free riding and of de minimis companies. Restricting the gap will encourage policy makers and enforcement agencies to adopt a more robust line against free riding and it is believed that there is a need to bring in more obligation by including businesses below current de-minimis levels. Of course this must be balanced by the requirement not to over-burden small businesses. Analysis shows that there are some 130,000-sub de minimis businesses handling packaging. Clearly, to bring such a number into the frame would be administratively unacceptable and present an impossible policing task for the agencies. There would be a major task in encouraging small businesses to take part and a consequent tendency to promote free riding. It may however be possible to find a formula that would involve some of these businesses, without the resultant administrative burden. Further work should be initiated immediately to examine the options.

6.3 It is clear that, although mathematical modelling can produce an unambiguous targets schedule based on current known statistics, it is not logical to suggest material specific recycling targets that are above the overall recycling target. For this reason, the recycling targets for paper have been adjusted downwards.

6.4 It can be seen from the schedules that approx. 1.3 million tonnes of extra material will have to be collected and recycled in UK between now and 2008. This is a challenging task, particularly for glass and aluminium, and urgent action is required if there is to be any chance of reaching European targets. Those officials negotiating on behalf of the UK should be encouraged not to compromise on an earlier date than 2008.

6.5 We must report growing concern in industry regarding material specific targets, particularly by those industries involved with glass and aluminium. There is a view that this method of target setting will impose unfair costs on those industries with most to do and therefore be anti-competitive. The Committee has worked on the basis that a Common position has been reached and there is little or no chance of altering that position now. Officials have confirmed this view.

6.6 There is an issue of confidence in the quality of data on wood and aluminium. Those officials talking to the sectors concerned should be encouraged to resolve this matter quickly.

6.7 Because it is unlikely that steel and aluminium will reach national targets separately, the Advisory Committee has discussed the adoption of a metals target instead of separate steel and aluminium targets. If adopted, both aluminium and steel PRNs would be accepted as discharging compliance for metals. As a result it would also mean that the target for steel would automatically be raised. Clearly it would be important to avoid any unfair subsidy of one metal by another and the issue therefore needs detailed examination. The ACP believes that flexibility should be built in because of the stiff task for both metals. The Directive will require achievement of a metals target.

7.0 Infrastructure

The task of collecting and recycling

7.1 The UK will need in the region of 1.3 million tonnes of extra material in order to meet its targets. This is extremely challenging and will require a rapid increase in domestic kerbside and bring systems. To give a shape to the challenge we need to collect and recycle the following quantities of materials over and above current performance. These numbers include additional demand to meet the overall recycling target.

7.2 Aluminium, glass and steel will have to come largely from domestic sources. It appears that at the moment there are only about 50 local authorities collecting glass packaging from the doorstep. It is believed that this will have to increase each year by over 80 authorities until all LAs are committed.

7.3 There are a number of obstacles to this. The main one is the lack of targets at LA level to capture light fraction packaging waste. LAs have Best Value Targets to recycle but these are based on a total tonnage measure. This means that authorities will naturally go for the heavy (largely non packaging) fractions, such as green waste and newspapers. Whilst they acknowledge the increasing importance of glass, authorities will be less interested in the collection of plastic, aluminium or steel. This must be addressed if progress is to be made and if the UK is to meet its targets under the Packaging Waste Directive.

7.4 Cost is clearly seen by some as a disincentive but it is not the only issue. For example, if all existing newspaper collection activity was expanded to handle dry recyclables, including glass, that would be a positive move. However, the Paper Industry has issued standards (EN 643) that present difficulties for the co-collection concept. This needs further examination.

7.5 There is evidence to show that, if all dry recyclables are removed from the domestic waste bin, the frequency of general waste collection can be reduced, thereby saving cost. There are good co-collection operations in such places as Daventry, Milton Keynes and particularly in the county of Hampshire and it is important that others learn from these examples of good practice in economically sound kerbside collection. Defra should urgently set up a study to establish the best economic solutions to kerbside collection. This should include looking at existing schemes with a view to improving, where appropriate, economic and diversion performance.

7.6 If there are economies of scale (and this should include LAs working together) they must be identified and authorities encouraged along this route. It is recommended that this be addressed urgently as an important key to making progress. The approach links several objectives. Firstly, it will facilitate the achievement of packaging targets, secondly it will considerably reduce the volume of packaging going to landfill and thirdly it will encourage a lower cost route to collection. In addition as more material is pulled from the waste stream jobs will be created and reprocessing capacity generated. This is especially believed to be the case with plastic bottles. If material is collected reprocessing capacity will follow.

7.7 The approach to collection must be balanced and that means creating maximum 'bring' capacity for all dry recyclables. This is a lower cost route than kerbside collection and, more than anything else, barriers here relate to local planning. LAs should develop a clear plan for the location of bring systems throughout the community. In addition they should identify sites that would clear planning restrictions if operated by commercial interests. Best practice low-cost operation should also be established in this area.

7.8 If the above recommendations do not bring about a change in approach to kerbside co-collection then, to enable the UK to meet its packaging objectives, LA packaging collection targets should be introduced. It will be necessary to measure performance in packaging waste diversion and each LA should be required to provide a business plan for the collection of packaging materials. There is evidence of tension between some collection and disposal authorities and where this exists a common recycling agenda must be encouraged.

7.9 Engagement of the householder is a clear requirement for success. Collection schemes need good participation and continual communication with the householder. This will require funds and patience. It will also require a move towards positive consumer incentives. Paying for quantity generated and variable charging should be adopted. The treatment of waste for disposal should be like any other utility in that you should pay for what you generate or use. The technology is now available for on-board weighing of bins and containers as they are emptied into the vehicle. This will allow charging by weight and also for aggregation of performance. There are already many examples of this on the continent and in North America. It is believed that trials are planned in Chelmsford with this type of equipment. A move in this direction is strongly recommended.

7.10 It should be emphasised that there is still significant waste packaging not being collected from the commercial sector. Whilst it is recognised that a higher rate of land fill tax, recommended above, will lead to higher levels of recovery, more should be done to encourage businesses to separate and present their waste for collection where a collection service exists. Voluntary agreements may work but legislation could be necessary.

End Use Markets.

7.11 The Advisory Committee does not believe there is a serious constraint in the reprocessing and end use market area at this time. There is sufficient capacity in all materials between UK reprocessing capability and the option to export. It is relevant to point out, however, that, as other Producer Responsibility initiatives in Vehicles and Electrical and Electronic goods become established, there will be from these sources a supply of waste materials for recycling and reprocessing capacity could become an issue. In regard to packaging, collection is currently the immediate key issue.

Funding

7.12 It is clear that if LAs had the necessary funds they would be more ready to engage in the dry recyclables area. It is known that there is money available to LAs for 'new opportunities', for performance and from the newly planned allocation of landfill tax. In Scotland and Wales there is a central plan and a grouping that deals with funds allocation and it is recommended that a similar strategic focus be developed for England. The ideal solution would be for an independent body to be responsible for the allocation of funds against best practise bids and to help channel the flow of PRN funds from the reprocessing industry. It is believed that there is up to some 290 million available from different central initiatives over the next three years. This can contribute towards the capital cost of new local authority collection and sorting infrastructure. PRN/PERN funding can then be used to provide revenue support to such projects as well as facilitating additional reprocessing capacity and market development initiatives. It is expected that, as the packaging targets rise, increasing levels of funding will flow towards LA initiatives. In summary, there must be a more transparent and co-ordinated approach to funding. It does not make sense to dilute the effect of available funds by spreading them too thinly. Rapid progress will come from a good return on this investment.

8.0 Data

8.1 The Data Task Force concluded that a national on-line database could play an essential part in more efficiently operating the UK Packaging Regulations. Such a mechanism would be interactive, would enable all obligated parties to submit data on-line and would allow for the rapid aggregation and cross checking of national information. The system could include information from reprocessors and be expanded to hold data on the performance of the collection industries. This should be operational for the 2005 data round. It would be a benefit to all parties involved in the management of the process. Any system would be designed to respect commercial confidentiality.

8.2 Funds to carry out a scoping exercise have been obtained and a project will start soon. It is envisaged that the system will be Agency owned and operated and it is strongly recommended that Government encouragement be given to drive a full commitment to getting this system in place urgently. There are signs of reluctance to proceed because of possible conflicts with other Agency activities. The importance of this project cannot be over-stated.

8.3 The provision of data up and down the packaging chain is a continuing problem. Whilst the Task Force proposed the introduction of a legal requirement that businesses should make data available upstream and downstream, the Committee identified potential problem areas. It is important to take a sensible approach and assess practical implications. This will require further work.

8.4 The completion of data submission is becoming easier but will be greatly improved with use of the Internet. The data form itself requires some simplification and proposals can be found at Appendix C.

8.5 Each year there is a number of obligated producers that register after the April deadline. This leads to delays in data management and the completion of the public register. It is recommended that there should be an escalating financial penalty for those who register late.

8.6 If a company changes ownership during a compliance year the Regulations currently require a complicated allocation of proportional obligation between old and new owners. This generates extra work and the potential for error. It is proposed that an amendment be introduced directing that the full obligation resides with the owner of the business prior to change of ownership or alternatively the owner of the business on 1 ^st July in any year.

8.7 Considerable work has been done in the past to develop off-the-shelf Data sets and sector protocols. There are now some efficient commercial systems available to help obligated parties calculate obligation and to handle their data. It is recommended that the opportunities that arise from these developments should actively be promoted by the enforcement agencies.

8.8 Particular regard has been paid to the requirement that the regulatory impact on small businesses be kept to a minimum. A review of current EU practices in this area has been carried out. It is recommended that a system be considered for 'locking' annual obligation to turnover for SMEs. Such a procedure would come into force following the first registration and data submission of a company. Initial data having been satisfactorily monitored by either compliance scheme and/or an agency audit, in each of the two subsequent years the company can amend its obligation by reference to the change in its annual turnover. After three years it would be necessary to re-submit data for further verification.

8.9 Currently, reprocessors are required to report PRNs/PERNs sold quarterly, but compliance schemes and directly registered companies only have to report PRNs/PERNs purchased at the end of the year. To facilitate national compliance tracking, it is recommended that compliance schemes and directly registered companies should be required to submit quarterly 'compliance' returns. As a result prompt publication of the resulting national statistics by the agencies should be possible and is strongly recommended

9.0 Enforcement

9.1 At present the PRN system lies outside the Regulations and is part of Guidance. It is recommended that this should be changed and that the PRN/PERN becomes the only recognised way of discharging compliance. The existing alternative evidence mechanism should be discontinued.

9.2 As part of incorporating the PRN/PERN mechanism into the Regulations, there should be criminal offences for knowingly furnishing a PRN/PERN that is false or misleading.

9.3 The quarterly returns provided by reprocessors are a key reporting control mechanism, but frequently contain errors and omissions or are submitted late. In order to reinforce compliance, this control needs to be tightened and should be linked to an offence for providing "reckless or misleading" data. The Agencies should also have the power to suspend accreditation until a late quarterly return is submitted or a return that has been prepared recklessly or contains misleading data has been corrected.

9.4 The Agencies should have stronger powers to suspend for longer periods reprocessors that persistently fail to meet their reporting responsibilities. They should have the power to revoke accreditation altogether where a reprocessor is found to have seriously abused the PRN/PERN system. This would entail the reprocessor having to re-apply for accreditation after serving a ban of a period of time. As currently, the Agencies retain the option of referring fraud to the police. Reprocessors convicted of offences should be automatically disqualified from accreditation for a period of say 3 years for a first offence. The agencies should ensure that it is not possible for these operators to reappear in new business starts or using another business base.

9.5 Reprocessors should be required to provide an annual PRN/PERN income and expenditure statement, consistent with their business plan and independently audited. The audit report, provided by the company's statutory auditors, should be attached to this income and expenditure statement.

9.6 The accreditation process should be extended beyond the assessment of a company's technical capability as a reprocessor or exporter to cover "fit and proper persons" tests and financial viability reviews.

9.7 Currently PERNs appear to be less closely monitored than PRNs, yet they have equivalent market value. All those businesses issuing PERNs would need to produce additional supporting evidence to demonstrate that the exported material has actually been reprocessed abroad. The level of proof required should be proportional to the quantity of PERNs issued. The issue of protocol tonnage would need to be addressed where tracking could be more difficult.

9.8 To support the management of PERNs co-operation between international environmental protection agencies should be pursued, particularly in the area of trans-frontier controls.

9.9 Reprocessors should be encouraged to obtain independent certification to support deliveries of packaging waste for which provenance cannot be readily determined.

9.10 The Agencies need to assess their resourcing requirements and define the gap between the resources available and the resources required, in order to provide a desirable level of enforcement assurance. Certainly extra attention will be required in the accreditation area. In support of this activity we strongly recommend that reprocessors/exporters be required to pay an accreditation fee. The Agencies should be asked to indicate what impact extra activity would have on the annual fee.

9.11 The Agencies should draw on technical expertise from reprocessors, compliance schemes, environmental consultancies, WRAP and professional firms to train officers to meet these new responsibilities. This support resource could also act as advisors generally. The Agencies would of course retain the responsibility for carrying out their policing and inspection programme.

9.12 To improve control of the system the Committee strongly supports the objective that the individual compliance option should cease and that all businesses should become members of compliance schemes. There are currently more than 20 to choose from. This could be phased in over three years and would lead to a better and more focussed handling of all aspects of compliance as well as releasing Agency resource to concentrate on the urgent issues of enforcement. Options to encourage transfer could include establishing incentives for individual compliers to join compliance schemes through revised scales of charge and for more demanding requirements for data and business plans.

Business plans

9.13 Business plans related to reprocessors and exporters, compliance schemes and individual compliers were examined in detail and there was an apparent lack of consistency. We believe that such plans can be improved and become the basis for a more focussed approach to achieving future targets. In particular we recommend that reprocessor/exporter business plans should be provided in much more detail at the time of accreditation. These plans would need to be audited thoroughly by the agencies at the time of renewal of accreditation and this will require added resource at the agencies. A statement from the independent statutory auditor of reprocessors/exporters would support the agency audits, to cover the financial details (see para 9.5 above). Not all purchases of PRNs are of sufficient volume to merit a detailed contract between the compliance scheme and reprocessor and neither would that be appropriate. For significant purchases a compliance scheme should request a business plan from a reprocessor. Items that could typically be included in business plans are suggested in Appendix B.

Compliance Schemes

9.14 It is important that a form of sanction exists against a compliance scheme that in any one year does not comply. The current position is that:

9.14.1 compliance schemes are currently not subject to offences and penalties 'unlike individually registered producers (Regulation 18).

9.14.2 compliance schemes that fail to carry out their producer responsibility obligations are liable to be de-registered (Regulations 13 and 17), whereas individually registered producers are liable to fines (Regulation 34).

9.14.3 Where a scheme is de-registered, the members then have to carry out their obligations themselves or join another compliance scheme.

9.15 Experience has shown that the fact that a compliance scheme is not subject to offences or penalties causes difficulty in practical terms. De-registration alone is not a sufficient penalty for non-compliance of a scheme. However there are obvious legal implications associated with the imposition of legal sanctions through the Regulations. The ACP has not been able to take legal advice in this respect but would recommend that Government investigate the matter further. It may be appropriate that some form of escalating financial penalty should be applied as well as carrying forward missed obligation. Additionally, there should not be any circumstance under which an obligated company can escape its responsibilities, whether inside or outside a compliance scheme.

Transparency of PRN Spend

9.16 Some 280 million was generated in PRN / PERN revenue between 1998 and 2002 in order to meet targets in the Packaging Regulations and to ensure that the UK met its targets under the Packaging Directive. The findings of a previous Task Force, (chaired by Jeff Cooper of the Environment Agency), were broadly accepted by the Enforcement Task Force. Some of these issues have been covered either directly or indirectly in this document. For completeness, the key recommendations of that task force were:

9.17 A tougher scrutiny regime should be developed, whereby the Agencies audit how each accredited reprocessor and exporter has spent the money raised through the sale of PRNs and PERNs throughout the previous year.

9.18 There should be changes made to the procedures for reporting to the Agencies, so that in future, information would be provided by each accredited reprocessor/ exporter on the following categories of expenditure:

9.18.1 Reprocessing capacity -including whether this is for new, additional capacity, or for adapting existing capacity, and resulting tonnage of PRNs to be produced.

9.18.2 Collection and Sorting - including whether this is for the provision of equipment, introduction of new systems, provision of technical expertise, or for joint multi-material approaches and pre-treatment.

9.18.3 New markets for recyclate - detail of what support has been given for new uses and products.

9.18.4 Price support - detail of what price support given eg. for secondary material markets.

9.18.5 Communications - details of communication with collectors, local authorities, consumers and education and technical support for trade.

9.18.6 Strategic development - liaison with consumers and local authorities.

9.18.7 Other expenditure not elsewhere identified, with details of expenditure incurred.

9.19 In addition, although it is recognised that not all of these categories are necessarily appropriate for each reprocessor, it is recommended that, for each of the above categories:

9.19.1 Expenditure incurred and the beneficial results of that expenditure should be identified

9.19.2 The recommendations should be implemented from 1 January 2004.

9.19.3 Annual financial returns for the previous year, in the revised format recommended above, should be signed by the Company Secretary (or most senior employee).

9.19.4 A limited time-scale of 3 years should be imposed for expenditure allocation.

9.19.5 Reprocessors and exporters should institute more rigorous internal accounting so that the use of PRN and PERN revenue can be easily monitored, for example, it might be appropriate to set up an internal account for PRN and PERN revenues.

9.20 The Task Force also recommended that the ACP should consider whether EfW plants should continue to issue PRNs. There is a strong view that unless PRN funds do make a difference to collection and reprocessing that these funds are largely wasted. The issue of whether EfW plants that are built for good commercial reasons and on long-term contracts should issue PRNs has been raised before. The suggestion by the task force has not been researched and the ACP concluded that further examination of the matter was merited. The impact and effect of the suggestion needs to be examined and should be the subject of a separate examination. In the mean time it is very important therefore that EfW plants clearly identify their use of PRN funds and are subject to audit as discussed above.

9.21 Many of the points above have similar objectives to the proposals on business plans.

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