UK circular economy inquiry calls for stronger levers on tax and landfill

MPs are calling for new fiscal and regulatory measures to be drawn up to help stimulate the UK's circular economy. These include a lower rate of VAT for recycled products, extended warranties for consumer goods, and a landfill ban for food waste. DOWNLOAD FULL REPORT below.

The Government’s Environmental Audit Committee (EAC) has today (24 July) published the findings of its parliamentary inquiry into the circular economy. Over the past five months it has called on written and oral evidence from a range of stakeholders including businesses and trade associations to ascertain how the UK can insulate itself from rising resource prices.

The inquiry found that the Government’s approach to the circular economy lacks ambition and leadership. Ministerial portfolios relating to waste, resource use and business innovation are split across a number of departments, with no strategic plan to achieve systemic change linked to industrial policy.

The report, entitled ‘Growing a circular economy: Ending the throwaway society’, makes it clear that more incentives need to be built around eco-design and that government officials need to work more closely with different industry sectors to set longer minimum warranty periods for consumer goods to encourage durability.

At EU level, the EAC is urging ministers to help establish eco-design standards across a range of products to make them easier to repair, upgrade, or recycle. Such standards should phase out products made from materials that cannot be recycled – this will encourage companies to design goods that have a clear end-of-life recovery route.

More radically, MPs suggest that the Government takes steps to reform taxation and producer responsibility regulations to reward companies that design greener products. They argue that differential VAT rates should be introduced based on the environmental impact or recycled content of products, with tax breaks for firms that repair goods or promote reuse.

Food waste is seen by many as a quick win for fast-tracking the circular economy, and the report wants a landfill ban introduced for it. The inquiry highlighted that just 400,000 tonnes of food waste (6%) is separately collected for recycling in the UK each year.

However the disjointed way in which waste is collected across the UK, particularly in England, presents a significant barrier. The vast array of council-operated recycling regimes is confusing, sub-scale and makes it harder for companies to access valuable materials that could be reused.

The EAC would like to see government guidance issued to local authorities in England to help standardise recycling collections, as Wales and Scotland have done. This is echoed by a recent Green Alliance report, which estimates the UK is losing £1.7bn worth of recyclable and reusable products each year because of inconsistent waste collection schemes.

If the Government supports recent EU proposals to increase recycling rates to 70% by 2030 this should help. EAC chair Joan Walley MP warns that recycling rates have started to plateau in England and that the UK still has a considerable way to go to catch up with the best performing countries in Europe.

“It is possible to get recycling rates to nearly 70% as other European countries and some UK councils have demonstrated,” she said. “There is about 3% to 5% of waste that you cannot avoid landfilling at the moment, but with better product design even that might be eliminated.

“Government must do more to ensure that the right conditions are in place so that many more businesses can shift from a linear approach to a circular one. We heard from business how successful green taxes such as the landfill tax had been in driving change in the waste industry. We need the same strong tax signals from the Treasury for the circular economy.”

Initial reaction to the EAC findings have been positive. The Carbon Trust has welcomed the proposals, especially the mooted incentives for business.

“Efficiency, business model innovation and product redesign are all important elements in tackling the resource challenge,” said Aleyn Smith-Gillespie, the Carbon Trust’s head of business model innovation. “Consumer education and engagement by brands, as well as business models that deliver better value to customers must also be part of the mix.

“Change can only happen as scale once companies are convinced it will be better than business as usual, and the financial case stacks up. This requires clear examples proving that greener products and greener business models can be both sustainable and successful.”

Friends of the Earth meanwhile have called the suggestions within the report “excellent”. Julian Kirby, resource use campaigner for the environmental charity, said: “The UK is the most import-dependent economy in Europe … ministers must help companies measure and reduce the natural resources required to sustain their business.

“This welcome report shows a different world is within our reach, where better product design, smarter government and responsible business combine to ensure that our economy and environment can thrive together.”

Maxine Perella

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