The Scottish Government

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5. Impacts on Consumers and Business

Our base assumptions ( i.e. scenario 0) are as shown in Table 5.1 and stated below.

Table 5.1 Bag consumption by type in Scotland

• The population of Scotland is taken as 5,062,011 (from the 2001 census) and the grossed number of households as 2.14 million. This is 2.33 people per household.
• The UK Expenditure and Food Survey 2002/03 [ ONS] states that total weekly expenditure in Scotland averaged £365 per household. Of this figure, approximately £110 per week is spent on goods that are likely to be sold with the option of acquiring a carrier bag ³⁶.
• It has been assumed that a £ spent by lower income households requires the same number of bags for purchases as a £ spent by higher income households ³⁷.
• The two largest sources of carrier bags are 'food' and 'clothing' retailers, followed by 'catering services' ( e.g. takeaway).
• Current consumption of bin liners is around 118 million per year.

5.1 Determining the Financial Burden on Consumers

We made the following assumptions concerning unit costs:

• A levy would be set at £0.10 on each bag. We derived the amount that would be paid from this value and the numbers of bags used as given in Table 4.2. We have accounted for the fact that, under scenarios 1B and 2B, SMEs are not included in the levy base.
• Consumers are currently not charged for carrier bags ³⁸. This cost element to retailers (which includes the purchase, transport and storage costs of the bags) is known as the 'hidden' cost and is accounted for. It is passed on to the consumer, embedded within the price of goods.
• The 'hidden' cost of lightweight plastic carrier bags to the retailer is £7.51 per 1,000 bags ³⁹.
• The 'hidden' cost of paper carrier bags to the retailer is £163.69 per 1,000 bags ⁴⁰.
• Heavyweight plastic carrier bags (or similar) are assumed to sell for £0.65 per bag ⁴¹.
• A bin liner is assumed to cost £0.05 per liner. This is the unit price averaged over ten products sold by Tesco.
• For scenarios 1A and 1B, it has been assumed that the additional 'hidden' costs incurred by stores are passed on to consumers as they increase due to additional purchase, transport and storage of paper carrier bags.
• Spending at SMEs has been assumed to account for 30% of total household expenditure ⁴². In order to exclude SMEs from being subject to the levy, we have simply reduced total expenditure by households on items likely to involve the acquisition of a carrier bag (of any type) by 30%.

The total additional financial burden incurred by Scottish consumers as a result of the levy is therefore made up of the elements shown in Equation 5.1.

Equation 5.1 Financial burden to consumers

We calculated the total additional financial burden to consumers for the four levy scenarios using:

• Equation 5.1.
• Bag use data under the scenarios from Table 4.2.
• The assumptions outlined above.

Table 5.2 shows how the numbers were derived for scenario 1A.

Table 5.2 Incremental cost to consumers of the levy under scenario 1A

Table 5.3 shows the results for all four levy scenarios. The greatest effect on the results is from the additional 'hidden' costs, which can vary significantly. In the first instance, we have assumed that, for all four scenarios, any additional 'hidden' costs or savings are passed on to the consumer (see columns 2-5).

The 'hidden' costs increase significantly for scenarios 1A and 1B as, despite fewer plastic bags being used, far more paper carriers are being used. However, costs go down in the scenarios (2A and 2B) where paper is included in the levy ( i.e.hiddencost savings), as both paper and plastic carrier bag use declines in these cases. At the discretion of the retailer, these savings could be passed on to the consumer, thus reducing the financial load on consumers (see columns 4 and 5). We have added to Table 5.3 the resulting costs in scenarios 2A and 2B assuming that the retailer does not pass on any savings they may accrue (see shaded columns 6 and 7).

Table 5.3 Incremental cost of the levy to consumers for all scenarios, with sensitivity on 'hidden' costs

The scale of the estimates of financial burden can be gauged by reference to the results in the UK Expenditure and Food Survey 2002/03 [ ONS]. This shows that average weekly household expenditure is £365. Our examination of the categories of expenditure shows that £110 of this is likely to require use of a carrier bag. This can be compared with an annual cost of the levy of between £3.57 and £10.58 per person.

Based on data from the annual UK Expenditure and Food Survey 2002/03 [ ONS], it is estimated that the costs given in Table 5.3 will represent a higher proportion of final income for households with lower incomes than for higher income households. Excluding paper bags from the levy base increases the financial burden (compare 1A with 2A and 1B with 2B), more than excluding SMEs (compare 1A with 1B and 2A with 2B).

5.2 Impact on the Business Sector

The proposed levy on plastic carrier bags will affect the economy as well as the environment. Our conclusions on the business and industry effects of the proposed levy are based on:

• Contact with industry.
• Examination of raw data.
• Evidence from previous studies on similar measures worldwide.

Scotland and the Plastic Carrier Bag Industry

CBC estimates that there are 15-20 plastic manufacturers, importers and distributors in Scotland, most of which are SMEs. We have validated this estimate through study of the online Applegate directory of plastics companies in the UK [Apgate]. The geographical distribution of these businesses shown in Table 5.4 indicates their wide distribution in Scotland. Both importers and/or distributors of carrier bags, as well as manufacturers, will be affected by the levy. In the Republic of Ireland, one manufacturer closed after PlasTax was introduced.

Table 5.4 Plastics and plastic bag manufacturers, importers and distributors in Scotland by postcode

Smaller enterprises are considered more likely to suffer greater impacts from a levy as it is anticipated that they have less capacity to adapt. Discussion with industry suggests most of the bin liners produced in the UK are manufactured in England. It is considered unlikely that production could be switched to Scotland to compensate for some of the lost plastic carrier bag production.

Industry estimates that anywhere between 300 to 700 direct jobs could be lost in Scotland alone as a result of a levy being imposed on lightweight plastic carrier bags [ CBC]. This estimate is made up of:

• Some 400 jobs at BPI's Greenock plant.
• Some 100 or so jobs at Simpac's plant in Glasgow.
• Jobs at other smaller manufacturers and importers that would either have to:

Another important company that would be affected by a levy is Smith Anderson in Fife ⁴⁴, which manufactures large volumes of paper bags from both virgin and recycled sources.

There would also be knock-on effects elsewhere in an industry that employs around 2,500 people in the manufacture, import and distribution of carrier bags and around 12,000 in the wider plastic films sector in the UK.

Paper Sector

The extent to which lightweight plastic carrier bags may be replaced by paper carrier bags is an issue of contention. In the Republic of Ireland, some sectors ( e.g. fashion and shoes) have switched to paper bags [ BRC]. In the scenarios where paper bags are excluded from the levy (1A and 1B), a 25% switch to paper carrier bags has been assumed. A move towards greater use of paper carrier bags would have consequences for those sectors involved in their manufacture, transport, waste management and import. As mentioned above, Smith Anderson is a major company in the paper recycling and bag manufacturing industry in Scotland.

Retail Sector

The estimated cost to UK supermarkets of giving away lightweight plastic carrier bags is reported in Section 2 (see Table 2.1).

Evidence from Republic of Ireland and BRC suggests that the food retail industry would benefit from net cost savings from a levy after taking set-up and administrative costs into account. Savings would result from having to buy far fewer plastic carrier bags, which are then given away for free, while sales of 'bags for life' and bin liners would increase [ BRC, ERM, UCD].

However, this would not be the case for non-food retailers. Evidence from the Republic of Ireland from those retailers that switched to paper bags (mainly 'high street' non-food retailers) suggests that greater storage space and more frequent deliveries are now required. This has increased their overhead costs for material purchase and transport by over four-fold [ BRC]. There are also different consumption patterns between food and non-food retailers. For the former, people often shop regularly and can thus plan to take reusable bags with them. For the latter, it is often more of an impulse purchase [ WRAP 2005].

Larger retailers are expected to find it easier to implement the system needs for compliance as they tend to have computerised systems and greater resources available. There will be a cost associated with administration of the levy, but the experience in the Republic of Ireland suggests that the effects were generally positive or neutral [ UCD].

The levy would represent a greater burden to smaller retailers ( e.g. newsagents, butchers, etc.) as they may not have computerised systems. As a minimum, it is anticipated that retailers will need to have an auditable system for:

• Recording carrier bags sales.
• Accounting for bags in stock.
• Reconciling sold versus stock remaining.
• Submitting records (quarterly in Republic of Ireland).
• Submitting payments.

Shoplifting and Theft

Theft, as an unwanted side effect of introducing a levy, is often raised as a problem for retailers. Although levels of theft were initially reported to have risen in the Republic of Ireland, they have since gone back to pre-levy levels and are even dropping further (information from the Department of Environment, Heritage and Local Government, Republic of Ireland).

The reported levels of 'shrinkage' (the industry term for theft) are calculated each year in the EU [Retail Research]. Table 5.5 shows shrinkage in percentage terms of turnover for 2003 and 2004 for the UK and Republic of Ireland. It is evident that both countries saw a drop in retail theft between 2003 and 2004.

Table 5.5 Changes in retail theft as a percentage of overall turnover for the UK and Republic of Ireland

Increased trolley and basket theft has been highlighted by some as a potential cost to industry caused by people wishing to save on paying for bags. Five months after the introduction of the PlasTax, the Retail, Grocery, Dairy and Allied Trades' Association ( RGDATA) for the Republic of Ireland reported that 50 baskets per month were disappearing from shops at a total cost of €450/month.

Impacts for Waste Management

This section uses the changes in the weight and volume of bags under each levy scenario to assess the changes in waste arisings, changes in waste management costs and changes in waste volumes. Note that this is only part of the total waste due to carrier bags, the total waste impact (including waste in the winning of raw materials and production, which will often take place outside of Scotland) is considered in more detail in the LCA and is presented in Figure 4.2 and Appendix 3.

The change in consumption of materials under each levy scenario is considered in section 4.6. To assess the impacts on waste management we then need to add in details of the waste disposal routes.

In 2002/03 ⁴⁵, 88.2% of all waste arisings in Scotland were disposed of to landfill, 2.2% were incinerated, 5.9% were recycled, 2% were composted and the remaining 1.7% was treated by other means [ SEPA].

For plastic bags we have assumed that there is a low level of recycling of post-consumer bags and that this would not change significantly if a levy were introduced. Thus, for the purpose of this calculation, all plastic bags would eventually be landfilled or incinerated ⁴⁶. We assumed that 97.6% of plastic bags were landfilled and 2.4% were incinerated ⁴⁷. It was not possible to estimate the quantity of lightweight plastic carrier bags or heavyweight plastic carrier bags going to each disposal route ⁴⁸. Instead, we applied the shares of landfill and incineration in total waste disposal equally to each.

For paper bags we were able to account for recycling in the calculations of waste management using Scottish waste statistic [ SEPA] ⁴⁹. Paper comes under the heading of 'paper and card' in SEPA data. As paper bags are not accounted for separately in SEPA waste statistics, we assumed that recycling rates for paper bags are the same as "paper and card". We made the following calculation:

• 24.26% of household 'bin' waste in Scotland is paper and card.

• 2,094,872 tonnes of household (controlled) waste were collected in 2002/03.
• This means that 508,216 tonnes of paper and card were collected from household waste for disposal (to landfill or incineration).
• 67,660 tonnes of paper and card were collected separately for recycling.
• Therefore, 13.3% of paper and card was recycled (67,660 tonnes/508,216 tonnes).
• The remaining paper is either landfilled (84.6%) or incinerated (2.1%) ⁵⁰.

We estimated the change in paper bags waste for each disposal route using:

• Our calculation ratios for landfilling, incineration and recycling of paper in Scotland.
• The net total change in annual paper consumption (and hence waste production) under the four levy scenarios given in Table 4.6.

The amounts shown in Table 5.6 represent changes in the disposal of residual household waste and recycling in an average year under each of the levy scenarios.

Table 5.6 Estimated annual changes in waste disposal routes for residual waste in Scotland under the different scenarios

Table 5.7 ⁵¹ shows estimated changes in landfill and incineration costs for household waste in Scotland as a whole, under each levy scenario. Costs increase under scenarios 1A and 1B, while costs decrease under scenarios 2A and 2B. These cost increases or decreases apply to local authorities who are responsible for household waste disposal.

Table 5.7 Estimated changes in waste management costs for Scotland due to the levy⁵²

The amount of solid waste generated can also be quantified in terms of volume. The Carrefour study only gives information on weight for the full life cycle, though it is clear that this is dominated by the end of life stage. Using data on relative bag storage volume from Table 2.1 it is possible to estimate the relative difference in volume of material sent for disposal (see Table 5.8), though this ignores wastes generated at stages other than end of life disposal. Results show a significant increase for scenarios 1A and 1B for volume relative to the base case. For scenarios 2A and 2B, however, the volume of bags disposed of relative to the base case falls significantly.

Table 5.8 Estimated changes in waste volumes in Scotland due to the levy

Charities

In a submission to Mike Pringle MSP, the Association of Charity Shops expressed its belief that the ability of some charity shops to operate successfully would be jeopardised by the proposed levy ⁵³. The Association is also concerned that donations by the public would become difficult, as donated stock delivered to shops is usually in plastic carrier bags. These bags are then reused for customer purchases.

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