NLWA Chair's letter to the Chancellor of the Exchequer

About the NLWA: Working to provide the cleanest waste infrastructure for north London

As the UK’s second largest waste authority, the NLWA’s statutory responsibility is to manage the recycling and disposal of residual waste on behalf of two million residents across seven London boroughs. We also own LondonEnergy Limited (LEL), which provides essential services including running reuse and recycling centres and the Energy from Waste Facility at the Edmonton EcoPark. LEL is an existing company which, we’re very pleased to say, operates similarly to the government’s plans for GB Energy – it generates sustainable energy and power for the benefit of communities not private shareholders.

We know that tackling the climate crisis will be a priority for this government and we strive towards the same outcome through our efforts to support waste reduction, promote reuse, and by seeking to minimise the environmental impact of both recycling and residual waste disposal, through our existing and new infrastructure, as well as our extensive and ambitious waste prevention programme. This is evident in our work to transform the Edmonton EcoPark into a brand-new sustainable waste hub.

Ensuring financial sustainability for local authorities

While a new parliamentary term is beginning - and with it a renewed opportunity to move towards a circular economy, your department must use the upcoming Budget to address the last government’s policy inconsistencies which place an unsustainable and counterproductive financial burden on local authorities which, across the capital, face a £400m funding shortfall this year.

Following 14 years of austerity measures, this should be a priority to ensure limited resources can be better spent on delivering essential frontline services and ensuring that waste reforms can be successfully implemented.

We would therefore like to see your department take urgent action to:

1. Support local authorities to meet waste targets and reforms

The previous government set out a raft of targets and reforms in the 2018 Resources and Waste Strategy with the aim of establishing a circular economy. This was a welcome development, but as the Public Accounts Committee found, “businesses and local authorities still do not have the clarity they need from the Department to prepare for the changes that will be required, which risks increasing costs and delaying implementation.” We urge you to take steps to avoid repeating this mistake by providing the necessary financial support to local authorities to meet the ambitions of the Strategy.

The implementation of extended responsibility for packaging (pEPR) which is due to go live next year is just one example where this is necessary. pEPR is a welcome step, but it is increasingly unclear whether EPR fees paid to local authorities will cover the true cost of the collection and disposal of packaging materials. The ‘hinted at’ reduction in illustrative base fees due to be paid by manufacturers – intended to cover this cost and incentivise waste reduction- only increases this uncertainty. It is imperative that the government maintains their pledge to move to a circular economy and ensures the financial strain of waste management falls on the shoulders of polluters- the ‘producers’, not local authorities and council tax payers.

Another example is Simpler Recycling, as a consequence of which, food waste recycling services will be compulsory from 2026. Although new burdens funding has been allocated to cover the capital costs expected to be incurred by collection authorities, this is widely considered to be insufficient. Disposal authorities, like the NLWA, were not allocated any new funding by the previous Government- demonstrating a clear lack of understanding of the nature of local government waste disposal in England. We estimate that the new legislation will require around £25m of capital costs for NLWA alone, which is a further cost that will have to be passed on to our boroughs, if not forthcoming from Government. It is imperative that both collection and disposal authorities receive the full funding required from government to cover the cost of implementing these critical waste reforms.

2. Make emissions trading fair and effective

The Emissions Trading Scheme (ETS) seeks to penalise and dissuade polluters by making them pay for their carbon emission. From 2028 it will include Energy from Waste (EfW) facilities. However, expanding ETS to include EfW will not achieve the desired outcome of decarbonising the waste sector, as product designers and producers who are most responsible for the fossil content of waste are not targeted. Instead, the Scheme will act as an “end-of-pipe" tax on local authorities who have very little control over the content of the waste they must collect and dispose of, rather than tackling fossil carbon embodied in products during manufacture.

Our estimates suggest that the ETS- as currently framed- could add up to £35m to the annual cost of waste disposal for residents in north London, placing further unsustainable strain upon stretched borough budgets and leading councils to further dramatic cuts to essential services, to pay for this new burden, for which we have zero control over. The market system which is key to the ETS also means costs are volatile and unpredictable, adding further risk to local authority finances and making it difficult to plan for services. For this reason, we believe expanding the ETS to include EfW facilities must either exclude local authority waste, or alternatively, local authorities must be provided with funding to fully cover our costs without causing cuts to front line services elsewhere.

3. Exempt publicly owned companies from the Electricity Generator Levy

The Electricity Generator Levy (EGL) has had significant financial consequences for our boroughs. We strongly support action to tackle windfall gains which benefit private shareholders at the expense of hard pressed consumers. However, LEL is caught by the EGL, and the only result of that is to prevent gains benefitting councils and council tax payers. We currently predict a total loss to our boroughs and council tax payers of over £20 million- money that could make a difference to the boroughs’ front line services. 

We believe that a specific and limited exemption should be given for companies owned by public sector organisations like LEL, and for levy payments already paid to be reimbursed for the benefit of local residents. To reiterate a point made earlier we see our arrangement as a prototype for GB Energy, and the communications for that company make clear the government’s desire is to see municipal and community energy profits flowing directly back into local communities. Maintaining the EGL for companies owned by the public sector is clearly inconsistent with the emerging language of GB Energy and needs to be addressed urgently.

Working together

We hope you will seriously consider these proposals, to avoid unnecessary burdens on council taxpayers in north London and across the country, and to ensure resources can be spent on improving and delivering essential services, including waste and recycling.

I would also like to emphasise that the NLWA is committed to sharing our knowledge and experience with you and your colleagues to inform decision making. We’re looking forward to creating a partnership which delivers evidence-based policy to support the economy and the environment, and I’d appreciate the opportunity to meet with you to discuss how this can work in practice.

Yours sincerely,

Cllr Clyde Loakes MBE

Chair, North London Waste Authority