A load of old rubbish

I want to talk to you about bottle deposit schemes.

No, come back. It's more interesting than it sounds. Michael Gove wants us to take our empties to one of 34,000 reverse-vending machines because it will help save the turtles or something. It's not going to save any turtles and it is a fantastically expensive way of achieving very little.

Still, it sounds like a nice idea and so it will probably happen. It seems to have worked quite well in some other countries so there seems no reason not to adopt it in the UK. This is faulty reasoning. The deposit scheme is a classic example of a feel-good policy that fails basic economic analysis.

The government's own economic analysis is a bit of a joke, as I explain in an article for Spiked today...

Could a bottle-deposit scheme make a difference to marine pollution? On the margins, perhaps, but DEFRA doesn’t seem to have high hopes. Reading its impact assessment, the first thing that struck me was that it barely mentions the ocean and only alludes to possible ‘further additional benefits’ when it does. This is in stark contrast to DEFRA’s press release and Michael Gove’s op-eds, which talk of little else. One gets the impression that Gove wanted to be seen to be doing something in response to Blue Planet II and came up with an idea that, upon closer inspection, wasn’t going to cut the mustard. Rather than saving the turtles, the impact assessment focuses on the less glamorous objective of reducing street litter.

The second thing that struck me was how damn expensive it is going to be. According to DEFRA, it will require 35,000 reverse vending machines to be installed around the country and a new quango – the Deposit Management Organisation – to be created. Small retailers will be required by law to turn themselves into manual take-back points, with minimal remuneration. The system is expected to cost over a billion pounds in its first year, with ongoing costs of £814million per annum. The government expects this to be paid for by consumers who don’t return their drink containers and by producer fees charged by the Deposit Management Organisation. Either way, it means higher prices for consumers.

Even under DEFRA’s somewhat optimistic assumptions, the financial returns from this system are meagre. It expects to collect extra recyclable material worth £37million, reduce litter collection costs by £50million and produce ‘greenhouse-gas emissions savings to society’ worth £12million. The estimate for litter collection looks high, but even if it is accurate, the system will make less than £1 for every £8 spent.

This is patently not cost-effective, and so DEFRA conjures up nearly £1 billion of intangible benefits while overlooking the huge amount of unpaid labour that will be required to make the system function. The impact assessment is hopelessly skewed towards finding a net gain.

Whether your objective is reducing marine pollution or reducing street litter, the huge sums of money that will be spent on this make-work scheme could be better used in so many ways. Britain already recycles 74 per cent of plastic drinks bottles, which is more than some places that have a deposit scheme. There is room for improvement but most of the bottles that go unrecycled are used out of home and could be recovered if better street bins were available.

Layering a deposit system on top of kerbside collection makes no economic sense. It just adds to the workload. (This is the big difference between the UK and most countries that have deposit schemes - the latter didn't have kerbside recycling when their deposit schemes were introduced.)

In layman's terms, the question here boils down to: 'Does a modest reduction in littering justify spending £814 million a year and forcing tens of millions of people to take their empty drink containers to a recycling station when 72 per cent of these containers are already being recycled and kerbside collection covers 99 per cent of British households?'

This question can only be answered in the affirmative if you put a huge value on the cost of littering and no value on people's time. That is essentially what DEFRA has done and I can see no justification for it. You can't throw the normal rules of cost-benefit analysis out of the window just because an idea sounds nice - and no amount of talking about turtles is going to change that.

You only have to subject the policy to normal cost-benefit analysis to see that it makes little sense. That is what I have done in this IEA briefing paper.

Read the rest of my Spiked piece here.