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A rough guide to scrap metal reform

In July, MPs backed Tory backbencher Richard Ottaway’s Private Member’s Bill to replace the Scrap Metal Dealers Act. This autumn the metal recycling trade goes cashless. MRW looks at some of the biggest changes in the modern history of the industry

The soaring price of metal has prompted a rise in metal theft. Insurers say theft in the UK has doubled in five years, costing the economy around £700m annually.

Popular targets include energy and communications networks, railways, roof lead, street furniture, gas canisters and scrap metal dealers; 50% of the 15,000 tonnes of metal stolen every year is stolen from scrap yards.

The UK metal recycling industry is worth £5.6bn and employs around 8,000. The trade has become subject to criticism from politicians, the media and industry because of the role some dealers play in buying and processing stolen metal.

One committee of MPs described the scrap trade as “the weak link” in efforts to tackle the theft crisis, and police have said a “significant element” in the industry “turns a blind eye or is involved in criminality”.

In particular, the widespread use of cash to pay for metal has been blamed for facilitating crime.

Does the law need changing?

While there is disagreement about how laws regulating the industry should be overhauled, industry leaders, politicians, police and regulators all agree that the Scrap Metal Dealers Act 1964 - itself a response to a rise in metal theft and the result of political compromise - is out of date.

The current Act requires dealers to register with the local authority every three years and keep records of metal they buy. It is illegal for sellers to give false details, with a penalty of £1,000. Police have powers to enter registered premises and inspect records.

Critics say the Act is full of loopholes. Estimates of the number of unregistered or illegal scrap sites range from 500 to 3,500, and unregistered dealers are widely believed to be at the heart of the metal theft problem.

In April MPs agreed an amendment to the Legal Aid and Sentencing Bill to ban dealers paying for metal with cash and increasing fines. The law was widely criticised for exempting registered itinerant dealers. Lord Faulkner called the exemption “baffling”.

The ban is expected to come into force in the autumn.

Who wants the law changed?

Other than some smaller scrap dealers and possibly some anti-regulation MPs, pretty much everyone wants change.

The Scrap Metal Dealers Bill (2012), now being piloted through the Commons by Tory MP Richard Ottaway, has been drafted and is supported by the Home Office.

The Bill is also supported by the Local Government Association, Energy Networks Association, MPs from the All-Party Parliamentary Group on Combating Metal Theft, the Labour Party and the police.

What does the industry say?

The British Metal Recycling Association (BMRA), which represents 300 dealers handling around 90% of UK scrap tonnage, has been at the forefront of trying to clean up the industry’s image.

Director-general Ian Hetherington has long demanded “radical reform” of the Act. He has consistently pushed for a single, nationally administered licensing scheme for “everyone collecting, purchasing, processing and selling discarded metal”.

A new national register must be open and accessible to the public, says Hetherington.

However, the industry has been highly critical of the cash ban. The BMRA, while not opposed to going cashless at some point, has warned that without first implementing the reforms it proposes, a cash ban will have no effect on metal theft and could make this situation worse by driving legitimate trade to illegitimate dealers.

The “ill-conceived” ban could put dealers out of business, it argues.

While non-BMRA merchants such as Alchemy Metals, which claims to be the first in the UK to introduce a customer ID audit trail, have lobbied hard for reform (see comment below), others are opposed.

Mark Schofield, director of JB Schofield and Sons, says proposed reforms will “produce masses of information and bureaucracy” making “life difficult for countless thousands of innocent customers”.

Schofield says politicians and the media are blowing the problem of metal theft out of proportion. “The general consensus is that we are being bullied, with the threat of draconian punishment, to do a job the police can’t do.”

What would the changes mean?

Ottaway’s bill would:

  • Require all scrap dealers to hold a licence.
  • Empower councils to refuse, vary and revoke scrap metal dealers’ licences and charge a fee to cover the costs of the scheme.
  • Force metal sellers to produce verifiable identification which is recorded and kept for two years by the dealer.
  • Set up a national, public register of scrap metal dealers run by the Environment Agency.
  • Empower police and councils to close unlicensed premises. Dealers would face unlimited fines for trading in cash, being unlicensed or failing to record deals.

Will the reform solve the problem?

Supporters believe the proposed Bill would go a long way to tackling the demand side of the criminal supply chain.

But Graham Jones, the MP whose Bill to reform the industry was defeated earlier this year by lack of Government support, has warned that the legislation will not address the growing problem of stolen metal being exported. Already police are drawing up plans to tackle a potential increase in illegal exports in response to the legislative shake-up.

Ottaway believes most exported stolen metal first passes through scrap dealers for processing. He told MRW: “[That] is where my Bill comes in, nipping the problem in the bud. But I am not naïve to think that new legislation will completely stop metal theft.”

Police point to the success of Operation Tornado, now in place across most of the UK, which has introduced ID schemes at participating scrap yards. British Transport Police, which runs Tornado with the support of the BMRA, says the pilot area in the north-east of England has seen metal theft offences fall by between 40% and 60%.

Comment - It’s time to lose the ‘Steptoe & son’ image

Nicola Guest

Many scrap metal dealers have a vision of equitable and fair trade for our industry along with a more respectable perception.

Richard Ottaway’s Bill has the power not only to stop the current disposal method of stolen metal, but also to allow legitimate scrap metal dealers to thrive.

The increase in metal value and ease with which ‘scrap can be disposed of has contributed greatly to the increase in theft. Illicit activity is rife, largely bought about by the easy opportunity available under the current 1964 Act. It has historically not been policed effectively and councils do not have the powers to refuse licences.

The 1964 Act fuels the laundering of scrap metal; too many merchants have consistently turned a blind eye to the fact that they are handling stolen materials. Furthermore, our industry thrives on inter-merchant trade, meaning that many merchants will be handling stolen materials even if they are not aware they are doing so.

With the laying of amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill, cash payments will be prohibited from the scrap metal sector later this year. This, along with a significant increase in penalties to punish unscrupulous metal dealers, is a large step in the right direction. 

Operation Tornado is showing large reductions in metal theft throughout the country. But it is a voluntary scheme and there is no legal recourse if the code of conduct is not complied with.

To effectively stamp out metal theft, a radical change in how the scrap industry is regulated is required. Ottaway’s Bill largely succeeds in this.

Increased fees and a more rigorous application process to include a ‘fit and proper’ persons check, extra powers for local authorities to revoke licences, greater powers for police to inspect unlicensed sites, detailed records and photographic ID along with full transaction descriptions are to be included.

These are robust elements of the Bill and will deter thieves greatly from trying to sell their stolen materials to legitimate sources. As in any industry, there will always be an element of illegitimate trade. The new system allows persistent offenders to be handled swiftly and efficiently by the relevant authorities.

Law-abiding scrap metal dealers should have nothing to fear from the new legislation. Only by closing down the means of disposal of stolen metal can the police have any real effect on metal theft. Ottaway’s Bill seems to tick all of the boxes and we look forward to the results of the committee stage in September.

Nicola Guest, marketing manager, Alchemy Metals

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