Businesses to sue Scottish Government over deposit return scheme delay

Sep 30, 2023

BUSINESSES are preparing to sue the Scottish Government for tens of millions of pounds after ministers yesterday shelved Scotland's deposit return scheme.

In a humiliating climbdown, Lorna Slater, the circular economy minister, told Holyrood she had been left with no choice but to postpone the plan by at least 18 months after the UK Government excluded glass from the Scottish operation.

She has previously said around £300 million has been invested by drink producers, retailers and other companies in the supply chain on the recycling scheme.

Scotland had been set to be the first part of the UK to introduce the initiative, despite having previously pushed the start date back to March 2024. Now, it will not commence until October 2025 "at the earliest".

READ MORE: DRS: Ministers face millions of pounds in compensation claims

It was originally due to launch in Scotland in April 2021 but was pushed back to July 2022 because of the Covid crisis, with further delays then seeing the start moved to August this year and then to March 2024.

The boss of one retailer with a substantial presence in Scotland estimated its investment in the deposit return scheme (DRS) had exceeded £1 million in terms of man hours and new technologies, according to a report.

Organisations representing producers, suppliers, retailers as well as licensed premises last month told The Herald they will be demanding money back for their members that they spent preparing for the recycling initiative if the initiative is axed after Ms Slater raised concerns it may not proceed as planned.

Drink producers have poured time into preparing barcodes for products sold in Scotland while shopkeepers have been clearing floor space and spending thousands of pounds to buy reverse vending machines where cans and bottles could be returned.

READ MORE: SNP joy as Alex Salmond advisor Kevin Pringle returns to calm storms

Mo Razzaq, from the Federation of Independent Retailers, which represents more than 1000 shops across Scotland, said businesses had been "seriously short-changed because of the continuing confusion".

He said his organisation is now seeking legal advice on the issue of compensation.

Speaking on BBC Radio Scotland's Good Morning Scotland programme this morning, Mr Razzaq, who is also a Labour councillor, said businesses had spent £10,000 converting space in shops to install a reverse vending machine, while many stores had spent £4,000 a year on contracts to hire the machines. He said further costs included the loss of shop space to well products that was taken up by the machines.

"We took on this because the Scottish Government told us it was a requirement for business. We did exactly what they asked for and now we are the ones out of pocket," he said.

He added the federation was "seeking legal advice on this matter", adding: "This wasn't down to retailers not trying to make this work, it is down to the Scottish Government not working it properly and not planning this properly."

Asked if his organisation is now considering suing the Scottish Government, he said: "Yes we are.

"We are working on the sums just now, we will need to look at the losses our members have suffered."

READ MORE: Campaigners fear deposit return scheme may be delayed 'indefinitely'

Pete Cheema, the chief executive of the Scottish Grocers’ Federation, said his members were demanding compensation. "The blame lies with the Scottish government who should have sorted many of these things out, the regulations and the practicalities, including with the UK government before they embarked upon this road," he said.

The plan would have resulted in 20p being added to the price of single-use drink containers that can be recycled. Individuals who bought a drink would be able to get the 20p back if they returned the empty can or bottle to a designated point.

SNP MSP and former finance secretary Kate Forbes said the recycling scheme could cause 'economic carnage'. Photo PA.

In a statement to Holyrood Ms Slater blamed Whitehall for aspects for the scheme's failure, including the need for a single administration fee to cover all UK initiatives and a single barcode and logo.

She said the UK government "has sadly seemed so far more intent on sabotaging this parliament than protecting our environment", adding: "It is now clear that we have been left with no other option than to delay the launch of Scotland's DRS, until October 2025 at the earliest based on the UK government's current stated aspirations."

This is the earliest target date set by Whitehall to have a UK-wide scheme but also means it will be after the next general election.

READ MORE: Calling the UK Government's bluff on glass has spectacularly failed

Speaking to BBC Radio Scotland today Ms Slater accepted businesses have made "significant investment" to prepare for the DRS – but she insisted the sector had supported the decision to delay until the UK Government's scheme is ready.

She said: "The scheme will go ahead. The input from business is they want it to go ahead in alignment with the UK, even knowing that means a delay to the scheme.

"We are listening to business and working towards that 2025 launch now."

She insisted it was the UK Government who "made this scheme impossible to deliver on the original timescale".

The minister added: "We have committed to doing what industry asks us to do, which is to align with the UK scheme, even though we don't know what that looks like yet."

However she said she is "very, very sceptical" about whether this will happen in time for October 2025, noting: "The UK haven't even passed their regulations yet, we’re in mid-2023 now."

She could not say what will happen to Circularity Scotland, the body set up to operate the DRS in Scotland, now it will not begin for more than two years.

The minister said: "Circularity Scotland is an industry body and industry wanted, that was the ask, that we align with the UK.

"So now industry have to decide how they are going to support Circularity Scotland."

Biffa, the UK waste management company that has invested millions in the scheme, this week warned ministers that the Scottish Government's credibility would be undermined if it ditched or delayed the scheme.

Circularity Scotland also said it remained viable even without glass.

Responding to Ms Slater's statement to Holyrood David Harris, its chief executive, said last night: "This is clearly a disappointing outcome, which will have a significant impact on investment in Scotland. We have made it clear that industry was prepared for the deposit return scheme to go live in March 2024, and that a scheme without glass is both economically viable and is an opportunity for Scotland to provide a platform for a UK-wide DRS."

First Minister Humza Yousaf claimed that during a meeting with more than 80 producers, retailers and hospitality representatives before Slater's statement, the "overwhelming view" was that "UK government interference" had made the Scottish scheme unviable.

Leon Thompson, UK Hospitality Scotland's executive director, said that "even before recent UK Government interventions, [the DRS] was not ready to launch in March and businesses had made that clear to the Scottish government".

The Society of Independent Brewers, British Soft Drinks Association and Scotch Whisky Association welcomed the move to a UK-wide approach.

Tracy Black, the Scotland director at the CBI, said: "Producers have long warned that the scheme, in its current form, is not fit for purpose and not only increases costs and complexity but reduces consumer choice."

A scheme for Scotland that included glass was announced by the Scottish Government in March 2020 but two years later the UK Government said that glass would not be included in the programme proposed for south of the border.

It confirmed that this would be the case at the end of last month as part of approving a partial exemption under the Internal Market Act which regulates trade across the UK following Brexit.

Alister Jack, the Scottish secretary, said: "Deposit return schemes need to be consistent across the whole of the UK, to provide a simple and effective system for businesses and consumers."

Businesses and industry associations had warned about the costs and raised concerns about the viability of the scheme as its details were thrashed out.

Some small drinks producers had said they would no longer sell in Scotland because they would need to produce different packaging.

The policy was a focus of the SNP leadership campaign with all of the candidates to replace Nicola Sturgeon agreeing to delay it because of how it was being implemented by the Scottish Government. Kate Forbes, the former finance secretary, said as she launched her leadership bid the scheme was "well intentioned" but could cause "economic carnage".

Environmental campaigners were left dismayed by Ms Slater's announcement of the latest delay.

Kat Jones, director of Action to Protect Rural Scotland, which has campaigned for a DRS north of the border, said: "This is a bleak day for anyone who cares about Scotland's litter crisis, or indeed the global climate crisis."

She raised doubts about whether the UK Government will be able to introduce a DRS for England by October 2025 - describing that date as being "at best provisional".

Dr Jones added: "Effectively, this puts deposit return on hold indefinitely. As a result we will continue to see cans and bottles littered in substantial numbers across Scotland for years to come."