THE Scottish Government’s ill-fated drinks recycling scheme was riddled with problems and mired in uncertainty before Westminster effectively halted it, a previously secret official report has revealed.

Lorna Slater, the Scottish Green minister in charge, released the Government’s own “Gateway Review” into the Deposit Return Scheme (DRS) on Wednesday night.

It showed that months before the UK Government imposed fatal restrictions on the scheme, officials were reporting widespread uncertainty over how it would work in practice.

Conducted in early March, the review found “indecision, inaction and a severe lack of confidence” and called for a “system-wide governance” refresh. 

READ MORE: Scotland to lose Westminster seats at election in boundary shake-up

It gave the project an “AMBER/RED” status, meaning successful delivery was “in doubt with major risks or issues apparent in a number of key areas”, with “urgent action needed to ensure these are addressed, and establish whether resolution is feasible”.

It found the SNP’s own leadership contest in the spring had created “much uncertainty” because people were reluctant to act until a new First Minister had been chosen.

The UK Government’s delay in ruling whether the scheme was compatible with the post-Brexit UK Internal Market Act (IMA) was also regarded as a significant “blocker”.

Some industry figures criticised the Scottish Government’s insistence on launching in August as “the worst possible” month as the soft drinks market was at a peak amid summer festivals, and said a quieter February or October launch would be better.

The review said a series of problems - some originating in Edinburgh, some in London - was “creating confusion and inconsistency which will be apparent for an August launch”. 

It said: “Collectively these issues, amongst many other system operation uncertainties, are creating indecision, inaction and a severe lack of confidence at the very time when actions and decisions are critical to delivering a working system with smooth operation.”

It went on: “The Review Team heard concern from multiple interviewees about the lack of clarity about processes, timings and detailed arrangements for the financial flows. 

“This presents practical difficulties for several parties involved as they are unable to make robust plans for their parts of the whole system operation.

“Almost every stakeholder expressed the need for clarity and certainty in order to help them invest and plan with confidence. 

“It was noted that lack of certainty was also inhibiting the industry and public engagement.”

The SNP-Green Government promoted the DRS as a way to reduce littering and improve recycling of single-use plastic and glass drink bottles and cans.

Consumers would have paid a 20p refundable deposit on each container, then redeemed it when it was returned to a store or recycling machine.

However many small drink producers refused to sign up to the scheme.

After becoming FM, Humza Yousaf announced in April that the DRS was being delayed from August 16 to March next year to get business on board.

But in May the UK Government refused to grant the scheme an exemption under the IMA unless glass was removed. 

The Scottish Government refused, complaining of Westminster over-reach, and delayed the DRS to October 2025, when a UK-wide version is due to begin.

That left the private company administering the scheme, Circularity Scotland, without an income and it went into administration with the loss of up to 60 jobs and the loss of £9m of public money loaned to it by the state-funded Scottish National Investment Bank. 

READ MORE: 'Pride is something to celebrate' says Tory MSP axed over gender bill

Sending the review to Holyrood’s Net Zero Committee, Ms Slater said it had found "that the two ‘critical, high impact blockers’ to DRS delivery at this point were the lack of an IMA exclusion and lack of clarity on display of pricing from the UK Government. 

“Indeed, the review noted that the uncertainty created by the UK Government’s delay in issuing an IMA exclusion meant that ‘retailers, producers and wholesalers are holding back investment decisions and plans to be ready for August’, and that the ‘lack of clarity on pricing is causing confusion and delay.

“The chilling effect of these ‘blockers’ made a go-live date of August impossible, and as a result in April the First Minister announced a delay until March 2024. 

“The review also noted that there was a need to renew the system-wide governance to ensure clear delivery and control of the full DRS programme. 

“In response to this we reviewed all the governance structures. This new governance structure enabled us to work closely with businesses to work through remaining issues to allow for a successful launch, prior to the IMA decision by the UK Government. 

“Ultimately, the key blocker noted within the review - the IMA exclusion - meant that Scotland’s DRS scheme as approved by the Scottish Parliament could no longer proceed. 

“Instead, we are working with the UK Government to develop revised plans for a more limited scheme that would go live in October 2025 at the earliest.” 

A UK Government source said the Scottish Government only made a formal application for an IMA exemption on March 6, and that London offered a way to let the DRS work.

The source said: "The UK Government acted quickly to give a partial exemption that could have salvaged the Scottish Government's botched scheme in a way that was acceptable to businesses and consumers.

"Furthermore Circularity Scotland said the scheme could go ahead on that basis.

"It was the Scottish Government who delayed the scheme and this is entirely a mess of their own making."