Scotland's DRS scheme needs urgent review to avoid 'failure'

This comes as a new cross-party report warned the chances of the DRS​ going live on time in August 2023, were vanishingly thin and unless serious defects were addressed, would not succeed, and may prove a very costly failure.

UKH Scotland executive director Leon Thompson said: “With little over a year until Scotland’s Deposit Return Scheme (DRS) goes live, [the] report from the Cross-Party Group on Beer and Pubs should serve as a wake-up call.

“The complexity of the scheme brings with it inherent financial risks to hospitality businesses.

“Scotland members continue to be concerned about secure storage, the theft of containers and the breakage of glass, all of which will result in the loss of deposits, a situation that would hit businesses hard.

“There is also no resolution to the issue of VAT paid on deposits. Unless HMRC makes changes, then businesses and consumers will be paying 24p per container but will only receive 20p back. DRS will become another form of taxation on businesses and customers, adding to the cost-of-living crisis.”

Significant changes

This comes as Scottish Minister Lorna Slater considered the findings from her second ‘independent gateway review’, carried out last month to look at the feasibility of delivery, of which a similar exercise last year led to a delay in the DRS launch date.

Thompson added: “It is clear all businesses will need to make significant changes to their financial and operating systems in order to comply with the complexity and variance in the regulations.

“This also threatens the prospect of a dramatic reduction in choice for Scottish customers as businesses withdraw from the market.

“As well as challenges over deposits, it is an important point that DRS is already proving a costly policy for hospitality at a time when operators can least afford it and when businesses already achieve impressive rates of recycling.”

The report, named the Impact of the Scottish Deposit Return Scheme​, took written and verbal evidence from a variety of witnesses, including small brewers and pub owners, stating a huge amount of detail was yet to be decided before they could fully understand what steps to take, further complicated by DRS imposing de-facto barriers to trade at Scotland’s borders.

Furthermore, the report warned of unintended and negative consequences for consumers as price rises and the range of products would be reduced, as well as for health policy as DRS would distort the Minimum Unit Pricing.

Urgent action 

In particular, concerns were raised about fraud through online sales and ‘booze trips’ across the border into England as well as the impact on Scotland’s small independent brewers, hospitality, and retailers, further increased by the recent decision of the UK Government to not proceed with DRS for glass, creating further logistical problems and costs.

Convenor of the Cross-Party Group Craig Hoy said: “Everyone understands we need to deliver circularity and net zero, but to be successful the scheme has to be effective. It’s clear from the evidence we heard the Scottish DRS is far from ready and if these details are not addressed it will not be viable.

“Scottish producers and retailers are still recovering from the pandemic and the Ukrainian conflict is hitting supply chains, energy and costs. The Scottish Government needs to carefully consider our recommendations so that we get this right.”

As well as an urgent review, the report recommended Scottish and UK Governments work together to align their schemes so there is a single market for brewers and retailers.

Cross Party Group member Fergus Ewing MSP said: “All the witnesses we heard from wanted to see a workable scheme in Scotland but their view was it would be easier and less costly to do this on a pan-UK basis, especially when different containers are included.

“The risks of the Scottish DRS failing are too high to get this wrong and urgent action is needed from the Minister to ensure these issues are addressed urgently.”