Wednesday 10 August 2016

Calculating the Burden of Commercial Waste














According to Bailiwick Express:

“The new commercial waste charge proposed by Ministers yesterday will add 24p per person onto the cost of an average meal out.”

“The rise in cost - which, of course, restaurants may choose to absorb - has been estimated by the Infrastructure Department, who will collect the charge from 2018, if the States agree. It has also worked out that the charge will equate to 72p on the cost of a hotel room per night.”

That does not seem excessive to me, and the real question is whether it can be absorbed either fully or partly by a restaurant or hotel, or passed onto the customer. A lot will I suspect depend on the profit margins of the establishment in question, but even if passed onto a consumer, it does not seem a huge amount.

As an example,  if you are talking about a pub meal for two, costing around £30, say, with drinks, this would add around 50p more to the bill. For cheaper beach cafes or establishments which have a good turnover of lower cost food this may be more of a problem, as the price per cover may be low, and the supplement proportionally larger. For example a small breakfast with coffee at a garden centre of beach cafe may come out at around £8 to £10 for an individual, or £16 to £20 for two. The key would be to apply any costs passed on by increasing the price of all items proportionally.

So how was the calculation made? I wondered, so I asked.

It should be noted that what follows is a preliminary estimate, and is subject to adjustments, but the Department of Infrastructure have very kindly given me the details.

Also a note on terminology. In the restaurant industry, the term "cover" refers to a diner who eats or a meal that is served. A cover differs from a table in that it represents only one of the meals served at that table. It differs from a dish in that it includes the extras that a diner orders, such as drinks, appetizers and desserts. When projecting sales, many restaurateurs find that they achieve a greater degree of accuracy by basing their calculations on expected number of covers rather than expected number of tables.

These calculations assume the restaurant is open 365 days per year with full sittings. Of course, the amount of waste generated is proportionate to the number of people dining at the establishment, so if the restaurant doesn’t have full sittings or is open less frequently, the rate per meal will remain constant, while the annual costs will reduce.

A small restaurant can be defined as one which has, on average, around 50 covers, with liquid waste produced of around 30 litres per cover. This gives an estimate of 1,500 litres as the daily water use, and 1,350 litres as daily sewage use. The user pays rate is 3.12 per cubic metre, which works out at a daily cost of £4 (rounded). An annual cost is £1,537 for 18,250 meals served, which works out at 8.4p a meal.

A large restaurant can be defined as one which has, on average, around 150 covers, with liquid waste produced of around 30 litres per cover. This gives an estimate of 4,500 litres as the daily water use, and 4,050 litres as daily sewage use. The user pays rate is 3.12 per cubic metre, which works out at a daily cost of £13 (rounded). An annual cost is £4,612 for 54,750 meals served, which also works out at 8.4p a meal.

For solid waste, the calculations are as follows:

A small restaurant can be defined as one which has, on average, around 50 covers, with a rate of waste generation of 1 kg per cover, giving around 50 kg per day. Over a year that is 18,250 kg, which has a rate of £150 per tonne, giving a daily cost of £8, and an annual cost of £2,738. For the 18,250 meals served, this costs at around 15p per meal.

A large restaurant can be defined as one which has, on average, around 150 covers, with a rate of waste generation of 1 kg per cover, giving around 150 kg per day. Over a year that is 54,750 kg, which has a rate of £150 per tonne, giving a daily cost of £23, and an annual cost of 8,213. For the 54,750 meals served, this costs at around 15p per meal.

With respect to solid waste, these indicative charges assume that the business is not recycling. The business costs can, of course, be reduced by recycling more.

it should be noted that the charge rates are in the early stages of development and the Department of Infrastructure is still working with stakeholders.

 These charges are based on a number of assumptions and do not account for the recycling which businesses could (and should) be doing more of. If they recycle more in the future and generally manage their waste better, then their costs will reduce accordingly.

Finally it should be noted that the charge rates indicated are not set in stone. There may be standing charges or proportioning in other ways before the final charges are proposed.

Part of the rationale behind the charge is not just to raise money, but to ensure that business pays its way. Since the advent of 0/10, the burden of taxation has fallen on the tax payer. As the summary of the Medium Term Business Plan notes:

“Introducing ‘user-pays’ funding in Jersey would not only encourage increased recycling rates and more efficient use of services but would also by charging commercial organisations it addresses the unfairness of the current funding regime. Currently businesses do not pay for these services and households bear the burden of paying for services through taxation”

A waste charge levied on ordinary taxpayers would mean them paying twice, as they already pay taxes for the support of services provided by the States, including waste disposal. But most trading businesses now pay 0% corporation tax, so this is tipping the balance just a little the other way with a charge on commercial waste.

“Charging for commercial solid waste transfers the direct cost from the taxpayer to business, many of whom do not pay income tax, and will also enable alternative business opportunities for recycling which are currently suppressed due to DfI’s free disposal option.”

Unlike the health charge, the principle here is not to raise revenue by an extra stealth tax on individuals, but to get commercial outlets to pay their way, and introduce an element of fairness. As the calculations given show, the impact on the hospitality industry does not appear as large as first feared.

When first mooted, my fear was an extra charge to hit the taxpayer who was also funding waste disposal by general taxation, where the taxpayer would pay twice - but as the arguments stated by the Minister's own words in the Medium Term Plan and the nature of the charge shows - levied on commercial waste only, this fear was in fact groundless.

1 comment:

Mark Forskitt said...

I've been occupied elsewhere too much recently to follow this, but surely the waste charge does not fall solely on food/hospitality enterprises alone? How is it calculated for other sectors and types of businesses?