Inconsistent projections, ambitious targets and fraud priced in
SCOTTISH Grocer analysis of the Scottish Government’s business case for DRS has raised questions over the figures at the heart of deposit return.
Millions of pounds of fraud priced in, inconsistent container numbers and return point projections, and an optimistic revised collection rate estimates are all present in the government’s 154 page Final Business and Regulatory Impact Assessment (BRIA) document.
Published in December 2021, the BRIA is the latest and final version of the Scottish Government’s assessment of the business case for DRS.
Scottish Grocer approached the government on 9 March requesting clarity on the contents of the BRIA, however a Scottish Government spokesperson failed to provide comment on the specific figures in question.
Two key figures within the BRIA – the number of return points and number of containers that will fall within scope of the scheme – reveal a significant gap between the Scottish Government’s projections and those of the organisation tasked with administering DRS: Circularity Scotland Limited (CSL).
The Scottish Government’s projection modelled a system with 2.2 billion containers in scope and 17,000 return points.
CSL has projected 2.7bn containers and 37,000 return points, representing gaps of 22.7% and 117.6% respectively. Circularity Scotland did not respond to a request for comment. The Scottish Government did not provide an explanation for the inconsistencies when asked.
On fraud, the BRIA estimates fraudulent returns in the range of 17.5m-22.3m containers annually – projecting £108m of fraud over a 25-year period.
At 20p per container, the lower end of that estimate would see £3.5m lost to fraud each year and £4.46m at the upper end. The BRIA acknowledges that this problem could be exacerbated by the Scottish Government’s decision to introduce DRS ahead of the rest of UK.
The BRIA states: “The decision to proceed with a Scottish DRS in advance of the rest of the UK creates increased potential for fraudulent activity, with non-DRS containers being transferred from England to Scotland in order to fraudulently obtain deposits.”
When asked how this level of fraud can be justified, if fraud would be reduced by implementing a UK-wide scheme, and what penalties would be in place for those engaged in fraud, the Scottish Government did not provide an answer.
The 25-year cost and benefit analysis of DRS in the BRIA also makes claims that Scottish Grocer could not substantiate.
On page 18 of the BRIA, the Scottish Government has revised the net benefit figure for DRS upwards to £615 million, a £25.4m increase from the government’s previous estimate of £589.6m.
This higher figure is justified in two ways: through a predicted higher expected DRS return rate in year one of operation; and a higher number of containers in circulation – due to a higher projected population.
The higher expected DRS return rate is backed by the Scottish Government increasing the scheme’s collection targets, up from 70% to 80% in year one, when a one-year delay to DRS was announced in December.
No detail has been provided on how this more ambitious target will be achieved and the Scottish Government did not provide justification for its new assumption when asked.
The delay to implementation was also the reasoning behind a higher estimate for container numbers, due to a higher population over the 25-year projection period.
The latest National Records of Scotland projection – published on 12 January 2022, after the BRIA was published – predicts the Scottish population will decline by 1.8% by 2045. Its findings are based on mid-2020 population estimates. The Scottish Government did not respond to a request for clarity on how population modelling was used to reach its conclusions on container numbers.
One variable not included in the Scottish Government’s business case for DRS is the effect of charging VAT on deposits.
Addressing the Scottish Parliament in December 2021, Scottish Government Green Skills, Circular Economy and Biodiversity minister Lorna Slater confirmed the UK Treasury had not exempted deposits from VAT.
The Scottish Government did not respond to a request for clarification on how DRS can work if VAT is applied to deposits.
In response to Scottish Grocer’s enquiries, the Scottish Government said: “Scotland’s deposit return scheme will be a vital part of our efforts to address the climate crisis. Similar schemes have already proven hugely successful across the world and ours has been subject to rigorous consultation, with industry involved throughout.
“The recent amendments to the DRS regulations extended the go live date to August 2023, to accommodate the impact that Covid and Brexit has had on this industry, and the strengthened collection targets are necessary to make sure the scheme maximises its environmental impact without delay.
“Scotland’s deposit return scheme will bring significant environmental and economic benefits. By recycling nearly 2 billion bottles and cans a year, it will reduce emissions, cut littering and help build a more circular economy.
“The UK Government has not confirmed when their scheme will start or what containers will be included. While we are keen to make sure plans are complementary, it is important we press ahead with this vital climate action.”
