Part one in our series: Scottish consumers will ultimately pay for the DRS scheme, even if it is postponed for a second time

The Herald:

The head of the organisation charged with running Scotland’s controversial deposit return scheme has joined businesses from the manufacturing, wholesale, retail, and hospitality sectors in warning that the recycling initiative will lead to higher core prices for consumers.

Circularity Scotland chief executive David Harris said extra production and administration costs will make their way to consumers already reeling from double-digit-percentage inflation. The increase at the tills will be in addition to the 20p deposit charged for every single-use drinks container.

“If we take into account the fact that there are costs for operating this system, and you anticipate that the producers will seek to pass that on, it will find its way down the chain,” said Mr Harris.

“It is for that reason that we are working night and day to build the most efficient deposit return scheme that we possibly can, and the most cost-effective one.”

Highland Spring, one of the 15 major drinks manufacturers among Circularity Scotland’s 31 members, bottles approximately 500 million litres of water from its main facility in Perthshire every year. Joint managing director Simon Oldham said the company will not be able to assess the “true costs” of the DRS until the scheme goes live.

The Herald: David Harris, chief executive of Circularity Scotland David Harris, chief executive of Circularity Scotland (Image: Chris Watt)

“We are unable to provide specifics, but as a low-margin business we are unlikely to be able to absorb all of the scheme costs ourselves,” he added.

Their comments come as industry pressure mounts for a pause to overhaul what many have claimed is an expensive and burdensome system. The DRS is currently scheduled to go live on August 16, having already been postponed from an original launch date in July 2022.

Reports at the weekend suggested the UK Government is set to block the troubled scheme by refusing to grant a trading exemption under the Internal Markets Act. The legislation is designed to ensure a level playing field for trade across the UK, which would not be the case because mandatory deposit return schemes in England and Wales will not come into force until 2025.

Read more: UK Government set to block Scotland's troubled Deposit Return Scheme

Meanwhile, all three of the SNP contenders to replace Nicola Sturgeon as First Minister have signalled a willingness to delay the DRS. Finance Secretary Kate Forbes warned yesterday that the plans will cause “economic carnage”, and rival Humza Yousaf has said he would exclude small businesses during the first year of operation if he is elected to the top post.

Speaking more broadly about the SNP’s coalition with the Scottish Greens – the driving force behind the DRS – Ash Regan said at the weekend that “we can’t have the tail wagging the dog”.

A further delay would have financial ramifications for Circularity Scotland, which as a not-for-profit organisation will have an annual turnover of approximately £700 million based on the value of the container deposits it collects.

Mr Harris said his organisation has to date been funded by approximately £5.5m from its members from the drinks manufacturing sector. Some other producers have been wary of signing up to the scheme – the deadline for which closes today – for fear they may also be on the hook to pay “upfront charges” to keep Circularity Scotland afloat in the event of a further delay that would cut off the organisation’s main stream of revenue.

The Herald: Kate Forbes warned of 'economic carnage' while speaking yesterday at the Cairngorm Brewery in AviemoreKate Forbes warned of 'economic carnage' while speaking yesterday at the Cairngorm Brewery in Aviemore (Image: PA)

In total Circularity Scotland has pulled together about £100m in capital funding to finance the establishment of the DRS network, including collections, sorting centres, administrative and IT systems. The majority of this – some £80m – has come from private waste management company Biffa which will collect billions of drinks bottles and cans from return points across Scotland each year, while also managing the bulking and counting centres that will process material for recycling.

Circularity Scotland has a further £18m in loans from Lloyds Bank and the Scottish National Investment Bank that will be repaid after the scheme goes live. In addition, Mr Harris said the company setting up his organisation’s IT systems will not be paid until the DRS comes into operation.

Read more: Kate Forbes: SNP must stop anti-business attitude amid DRS 'carnage'

“There are no guarantees here, so Biffa are at risk for a very significant amount of money,” he said. “It is a big investment for them to make.”

Mr Harris added: “Every producer large and small pays the same per-container fee, so the smallest guy gets the advantage of the big guy’s buying power. The little guys are not keen on paying the fee but it’s a lot lower than it would be if they didn’t have the advantage of our economies of scale.

“So yes, we understand this is a cost to the consumer, but we are not the policy-makers, we are not government. We are the company that industry have created to meet their obligations.”

The German experience – “If it’s simple it will work”