By Jason Caddy
Quarters one and two of 2021 could be memorable for hoteliers for all the wrong reasons. The spectre of a tourist tax becoming a reality at the start of next year may very well coincide with another Scottish government backed initiative, a Scotland-only Deposit Return Scheme (DRS) which is likely going to impact on your cash flow.
Hoteliers will have to pay 20p on single-use plastic, glass bottles or aluminium cans. It has been suggested that you needn’t pass the cost on to the customer – but is that likely given that you could incur losses through breakages or by bottles and cans going walkabout if you don’t?
The way it will work is that you will have already paid the deposits to your wholesaler/provider – for example, if you order 1000 bottles, it equates to £200 worth of deposits on top. All deposits go to the yet to be formed Scheme Administrator, the body that will oversee and run the scheme and uplift the empty cans and bottles from your business, and only when all the empty bottles and cans are returned to the Scheme Administrator will be deposits be refunded to the hotelier.
But there’s no provision for breakage – and it’s this that threatens to impact your cashflow. Your business is going to have to wait what could be up to three months before you get the money back. Not to mention having to ‘police’ and ‘housekeep’ the scheme by making sure all of the bottles and cans are collected and stored.
Making Scotland greener by incentivising recycling is what’s behind this, but it ignores the fact that hoteliers already have waste management contracts and are happy to recycle.
Hoteliers will receive a handling charge for storing and packaging and separating. We don’t yet know if the deposit will carry VAT or not.
Hospitality industry groups have warned that, even at this early stage this could throw up operational problems. For example, A DRS trial by Zero Waste Scotland, that included a hotel, has given UKHospitality’s Director for Scotland Willie Macleod cause for concern.
He said, “We are waiting for the results back from Zero Waste Scotland of a pilot scheme in which three businesses participated, including a hotel with a busy bar and restaurant and I know that it had a problem with storage because the empty bottles and cans required greater handling than is required at present. As well as storage implications, there were also concerns expressed that the storage containers provided weren’t adequate for the job. “
“The longer we’re involved in discussions around this the more we need to know. There is still a lot of detail to emerge.”
The Scheme Administrator will be a not-for-profit organisation the implementation of which the likes of UK Hospitality, Zero Waste Scotland and the Federation of Small Businesses are all in discussions with Scottish government ministers about right now as part of an advisory group. It is not the responsibility of the Scottish government alone to set it up.
No can or bottle can be sold in Scotland without being registered with the Scheme Administrator and therefore by being part of the DRS. The Scheme Administrator will be based on a European model because similar Deposit Return Schemes run in European countries. It will be funded from the sale of recyclable materials and unredeemed deposits – suggesting that they aren’t expecting a 100 per cent return rate.
The effectiveness of Scheme Administrator has been called into question by Colin Smith, Chief Executive of the Scottish Wholesale Association because quite simply trading arrangements in the EU differ from our own.
He said, “The market in Europe is different to the UK market. We are a lot more fragmented wholesale market whereas Europe is more of a direct supply route. It’s wholesalers supplying many smaller independent hotels, for example. So when you try to apply this model based on a direct route and overlay on a fragmented market it could be unworkable.”
And if you have a waste management contract already in place, the DRS will work in tandem with it rather than replace it. Said Willie Macleod, “When Waste Scotland regulations came in last September, governing the separation of paper, plastic, glass and metal, most hospitality businesses entered into waste management contracts. Now, certain aluminium, glass and plastic must be disposed of under the DRS system. But some items that are made of the same materials but are not the scope of DRS, like catering size cans and plastic jars and marmalade containers still need to be recycled, so they still require a waste management contract.”
The Scheme Administrator will also be responsible for preventing fraud, like cross-border trading – such as non-deposit stock being sold in Scotland. Qualifying products sold in Scotland require a separate marking and this means two separate sets of labels and barcodes which is okay for the big producers but what about the smaller independents? This could mean that even Scottish producers only sell their products in England and not even bother with their home market because it’s cheaper to do so.
That’s why Colin reckons that this shouldn’t be going ahead as a Scotland only scheme. “It should be UK-wide. It will put up a beverage trade barrier between not only Scotland and England but also the rest of the world,” he said.
Hotel Scotland will update you on what’s happening just as soon as the DRS regulations are published by the Scottish government.