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The National Audit Office (NAO) has recently published its report ‘Investigation into the Government’s actions to combat waste crime in England’. Lauren Bowkett, a Principal Associate in the Financial Crime Team at Shoosmiths, takes us through the key findings of the report and highlights the statistics which have come to light in relation to confiscation under the Proceeds of Crime Act 2002 (PoCA).
Waste crime is the illegal transport, disposal or management of waste. It includes fly-tipping and crimes such as the illegal export of waste, illegal operation of waste sites, misdescribing waste and falsifying records. Waste management has also allegedly been the target of quite sophisticated frauds.
In May the BBC reported that three tonnes of fly-tipping rubbish had been cleared from Warley Moor Reservoir, a drinking water reservoir near Leeds. More than 800 tyres were cleared, costing Calderdale Council £4,500. Fly-tipping is one of the most obvious forms of waste crime and is not only an eyesore, but it is damaging to the environment. According to Resources and Waste Minister Jo Churchill waste crime “is estimated to cost the economy an astonishing £924 million per year in England”. This is much more than the £17 million allocated by the Government to enforce against it.
The NAO have recently published a report ‘Investigation into the Government’s actions to combat waste crime in England’. The report highlights the steady rise in organised, large scale waste crime in England. Below are the 8 key findings from the report:
The lack of data available to EA and Defra means it is virtually impossible to quantify the potential financial benefit to criminals from waste crime. Under-reporting of fly-tipping incidents on private land and undisclosed illegal waste sites means that collecting data to assist in valuing waste crime offences makes them difficult to prosecute. To enable the EA and other prosecuting authorities to prosecute waste crimes more effectively, the Government need to understand the scale of the problem in much more detail.
According to the Resources and Waste Minister, mandatory digital waste tracking will assist in tackling this issue. Digital waste tracking is intended to record information from the point waste is produced to the point of disposal, recycle or reuse. Whilst this may sound a wonderfully packaged plan it is only in the consultation stages and could take years to implement.
According to the report, the EA intercepts between 200 – 450 shipping containers each year which do not comply with waste export regulations. This equates to between 6,000 and 13,500 tonnes. In addition to the EA’s data gaps, is the limited funding being allocated by the Government to tackle enforcement of waste crime. The amount of waste intercepted which does not comply with waste export regulation cannot be ignored. If the Government invested in understanding the scale of the problem and then enforcing action against perpetrators, a steady revenue stream from the imposition of fines and if sufficiently serious, confiscation orders would inevitably stem from this.
It should be noted that the Covid-19 pandemic brought about an anomaly in terms of the statistics which are reported within this investigative report. In 2018-2019 EA were aware of 685 active illegal waste sites, but only 470 in 2020-2021. The statistic should be considered with an air of caution as England was ‘staying at home’ during the pandemic when the number of reports to EA fell. Also, any reports that were made would have been difficult for EA officers to substantiate, as they were not able to visit sites and gather the evidence necessary to prosecute.
Within the current regime it is very easy to breach permit exemptions. Certain waste activities can operate under a waste exemption instead of requiring an environmental permit. Exemptions can be registered with the EA at no cost and without verification. The current system allows widespread misuse, giving perpetrators the opportunity to dispose of waste without the correct environmental permit.
The Resources and Waste Minister has said that the Government will be reforming the licensing system. However, details are yet to be released on how that might look.
According to the report local authorities are spending around £11.6 million a year cleaning up fly-tipping alone. The total figure in relation to the clean-up of waste crime in the UK is unknown and harks back to the EA’s lack of data in relation to waste crime. On 27 April 2022 the Defra press office reported that between 2017 and 2020, EA issued fines of £1.1 million for illegal waste sites and obtained £5.5 million in PoCA confiscation orders. This is a disappointing statistic which shows the financial benefit extracted from criminals and returned to the public purse is negligible when considered in light of the overall financial and environmental impact of the offences committed.
Section 42 of the Finance Act 1996 specifies the rates of Land Fill tax. In 1996 the standard rate of Land Fill tax was £7.00 per tonne however in April 2022 the standard rate per tonne is £98.60. Despite having a positive impact diverting waste away from landfill to more environmentally friendly methods of waste disposal. The levy has increased faster than inflation and increased the potential financial return using illegal methods which evade Land Fill Tax, such as misdescription of waste and the use of illegal waste sites.
HMRC estimate that £200 million of Land Fill Tax went uncollected between 2019-2020. Another opportunity missed and another apparent opportunity to criminals engaged in waste disposal to go undetected and without prosecution or fine.
In recent years, due to the lucrative nature of waste crime and the very few barriers of entry into the industry, there has been a steady increase of involvement from large scale organised crime groups. Despite improved understanding through initiatives such as the Joint Unit for Waste Crime, what is clear is that those who commit environmental crimes are currently likely to go undetected and without punishment.
It is a simple test of risk – reward. Offences which can be committed, creating substantial financial gain, at minimal risk of prosecution, are inevitably going to be of interest to organised crime groups.
On consideration of the 8 key findings from the NAO report, the concerns raised by MPs regarding the response to waste crime appear to have been substantiated. Like so many public sector departments the issues arise through a lack of funding, which in turn is having a negative impact on the regulation and enforcement of waste crime.
The Government have begun to respond to certain elements of the report and revealed various initiatives and schemes to assist in tackling the issues raised by NAO. If implemented, such initiatives may help to clean up the environment and improve the financial return/recovery consequent on the prosecution of waste crime. However, the fear is, particularly in the current economic climate, that whatever initiatives are talked about or put in place, the fundamental issue of resource may remain. Until energy, commitment and resources are devoted to the issue there remains the strong prospect that criminals who deliberately breach the legislation in the pursuit of financial gain will continue to take the view that the risk-reward balance remains in their favour and is there to be exploited.
Shoosmiths has a dedicated Financial Crime team with specialist expertise in waste crime offences. We can help your business manage environmental risk and comply with the complexities of environmental legislation. If things go wrong, the team can advise in defending enforcement action. To read more about environmental prosecutions click here.
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.
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